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Will the Gates-Buffett Giving Pledge Work?

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Heather Horn points out a piece by Dayo Olopade at the American Prospect about the effectiveness of large-scale philanthropy, with "40 billionaires' fortunes scheduled to flood into the system" after the challenge put forth by Bill Gates and Warren Buffett for the wealthiest among us to give half their fortunes to charity.

Olopade touches on "mission creep"--the problem of expanding organizations' overall goals while staying focused on current issues, as well as the "tension between what the Center for Effective Philanthropy calls 'program impact' and 'institutional effectiveness.' The former is the data that the Gates Foundation lives by: doses of vaccines distributed, lives saved, dollars and manpower deployed to attack a problem. The latter refers to the sustainability of the change produced--and is harder to judge. Many experts have found that good intentions still produce unintended consequences. When a Gates-backed NGO hires all the best nurses in a poor country, for example, it heals the sick but also siphons human resources from the local health infrastructure. Scaling up global development contributions risks provoking 'Dutch disease,' when a sudden flood of dollars causes damaging inflation in local economies."

But inflation isn't the only damage a deluge of aid can cause. Deflation can become a very real problem, too.

We touched on this a while back, after the Haiti earthquake, in an article called "Why Haiti Is Begging The World To Stop Sending Food."

In that instance, Professor Gerald Murray, an anthropologist on the faculty of the University of Florida who has studied Haiti extensively, told us that, “If food is free, local farmers can't sell what they grow. This has been a dilemma, both philosophical and practical, for many decades now.”

Murray used rice as an example.

“During the Clinton administration,” he explained, “rice production was subsidized by the government and sent to Haiti, which undercut the Haitian farmers. Flooding the country with free food has a deleterious impact on the country and the economy.”

Murray didn’t suggest ending food aid. Just the way the aid gets implemented. He pointed out that the earthquake didn't kill the agrarian economy of Haiti, and that there was absolutely a justification for the distribution of free food. However, he said it should be purchased from local farmers, "thereby stimulating the local economy."

Houston money manager Ryan Krueger, who has a particular focus on agricultural markets, told us:

"Rather than sending food to third-world nations, let’s send them a work order. If we weren't so busy protecting American farmers, many of the poorest nations could develop their agricultural resources. Unfortunately, industries haven’t been constructed around them because the US would rather pay higher prices to its own farmers. Then, we’re all asked to pitch in and help with a donation to the very people we’ve put in that bad situation in the first place."

Horn says, "The best model for getting the most bang-for-charitable-buck doesn't seem to be 100% clear." And Olopade concludes that the coming dollars from the Gates-Buffett Giving Pledge means "the philanthropic world must change gears."
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