The Disadvantages of Charity

by Kevin Johnston

Charitable giving doesn't always help people. We give with the best of intentions, but the act of giving starts a chain of events that can cause many disadvantages. For example, Mike Bloomberg, mayor of New York City, banned food donations to homeless shelters because of concern over the nutritional value of donated food. Similar problems occur with other donations. Some actually make problems worse, and some simply don't help.

Undermining Local Economies

Many donated goods never reach the intended recipients, or the recipients simply can't use them. For example, the United States sent millions of Pop-Tarts to Afghanistan. Most of these ended up being sold on the black market, thus harming local merchants selling food. Similarly, donations of outdated Super Bowl T-shirts have harmed textile manufacturers competing to sell shirts in the same market. Free goods pouring into a poor country can help keep them poor because the small-business owners find it increasingly difficult to sell. Customers won't buy when competing products are free.

Missing the Target

Getting a teddy bear when you need medicine to treat your tuberculosis can be disheartening. The website Foreign Policy (foreignpolicy.com) posted pictures of teddy bears and hand puppets that were sent to Haiti when what was needed was medicine. Some readers objected that it was still a sweet gesture, but the bottom line is that children could have used the value of those donations for medical help. Dirty T-shirts and yoga mats have piled up in some areas where people need food and shelter.

Misguided Investments

Many charities invest so they can make more money to help alleviate problems. However, these investments sometimes perpetuate the very problems the charities want to address. For example, the "Los Angeles Times" reported on Dec. 2, 2012, that the Gates Foundation, founded by Bill and Melinda Gates, invested millions of dollars in oil companies. These same companies are accused of causing the respiratory problems in Nigeria that the Gates Foundation is battling.

Learned Helplessness

"The Wall Street Journal" reports that an influx of donations to Africa has helped ineffective governments remain in power. With so much money flowing in, countries have little incentive to grow, improve and become self-sustaining. These large amounts of money invite corruption, and the result is that the populace does not benefit because the money gets siphoned off by bureaucrats. Poverty continues, and that prompts more aid, which further empowers corrupt and ineffective governments.

About the Author

Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.

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