When charity does more harm than good

The recent call to cap the number of charity shops on Britain's high streets sheds light on some of the hidden costs and unintended consequences of charitable giving and the fact that too much charity can often do more harm than good. While charities often escape serious criticism today, this has not always been the case.

For example, in his 1875 publication, Thrift, Samuel Smiles warned that ‘charity, like man, is sometimes blind, and frequently misguided’, and that if money is not wisely distributed, then it will ‘sap the foundations of self-respect, and break down the very outworks of virtue itself.’ To reinforce his message, Smiles refers to the example of London in the mid-nineteenth century where annual donations of £3 million had resulted in one in three of the population being relieved by charitable institutions. This raised a number of intriguing questions:

‘May not the money spent in charity create the distress it relieves - besides creating other distress which it fails to relieve? Uneducated and idle people will not exert themselves for a living, when they have the hope of obtaining the living without exertion. Who will be frugal and provident, when charity offers all that frugality and providence can confer? Does not the gift of the advantages, comforts, and rewards of industry, without the necessity of labouring for them, tend to sap the very foundations of energy and self-reliance? Is not the circumstance that poverty is the only requisite qualification on the part of the applicant for charity, calculated to tempt the people to self-indulgence, to dissipation, and to those courses of life which keep them poor?’

Smiles also criticises the practice of wealthy individuals who leave large sums of money to set up charities, suggesting that while they may wish to do good, they often do much moral injury as their charities are anything but charitable. Again, Smiles is concerned with how these charities tend to destroy the self-respect of the poor:

´We can get this charity for nothing. We can get medical assistance for nothing. We can get our children educated for nothing. Why should we work? Why should we save? Such is the idea which charity, so-called, inculcates. The "Charitable Institution" becomes a genteel poor-house; and the lesson is extensively taught that we can do better by begging than by working.’

Smiles regarded the United States as the society most in harmony with his ideas and he is said to have first come across the phrase ‘self-help’ in Ralph Waldo Emerson’s 1841 lecture, Man the Reformer, in which he asked his audience to ‘learn the lesson of self-help’. Emerson was also heavily critical of the growth of philanthropy in the US during the first half of the nineteenth century:

‘I am ashamed to think how easily we capitulate to badges and names, to large societies and dead institutions. Every decent and well-spoken individual affects and sways me more than is right. I ought to go upright and vital, and speak the rude truth in all ways. If malice and vanity wear the coat of philanthropy, shall that pass?

I tell thee, thou foolish philanthropist, that I grudge the dollar, the dime, the cent, I give to such men as do not belong to me and to whom I do not belong. There is a class of persons to whom by all spiritual affinity I am bought and sold; for them I will go to prison, if need be; but your miscellaneous popular charities; the education at college of fools; the building of meeting-houses to the vain end to which many now stand; alms to sots; and the thousandfold Relief Societies; — though I confess with shame I sometimes succumb and give the dollar, it is a wicked dollar which by and by I shall have the manhood to withhold.

Men who will not struggle and exert themselves, are those who are helped first. The worst sort of persons are made comfortable: whilst the hard-working, self-supporting man, who disdains to throw himself upon charity, is compelled to pay rates for the maintenance of the idle. Charity stretches forth its hand to the rottenest parts of society; it rarely seeks out, or helps, the struggling and the honest.’

Like Smiles, Emerson was also critical of those who were quick to become dependent upon others, whilst neglecting the importance and value of the self-helping man:

‘Welcome evermore to gods and men is the self-helping man. For him all doors are flung wide: him all tongues greet, all honors crown, all eyes follow with desire. Our love goes out to him and embraces him, because he did not need it. We solicitously and apologetically caress and celebrate him, because he held on his way and scorned our disapprobation.’

These comments from the past highlight two important points. First, instead of assuming that charitable activities will always benefit society simply because they are driven by good intentions, there needs to be much more critical analysis of the hidden costs and unintended consequences associated with such activities. Second, out of the car crash that was socialism, the self-helping man only just survived and could be seen limping from the scene with a number of injuries. I wonder who, if anyone, is now prepared to champion his cause? 

I agree with Samuel Smiles argument that charity can often do more harm than good. The questions he raised in his 1875 publication, Thrift, are the same questions many ask about the United States government and whether they should help the unemployed. Unemployment checks and food stamps provide an actual way of life for some people. Although the government makes the requirement that one must be actively looking for a job to be considered unemployed the length at which someone receives unemployment checks can slow their drive to find a job. For example, if you have nearly two years of unemployment benefits, you may delay making any really hard career decisions for well over a year and a half as opposed to someone who has had unemployment benefits for only a week.
I have refused to quell my conscious by giving to charities until I am satisfied that it is either good for the economy, or does more good than harm. Trust me, it is a lot easier to just give, but I know that would be wrong and unconscionable. The article is interesting, however I do not feel that it has resolved the issue. The first key point is one of the pillars of economics “The Invisible Hand”, fundamentally it about providing people with everything they need, by providing the greedy with the baubles and trinkets. Clearly if the rich were to accrue significant baubles and trinkets, and then give them to charity, they could undermine “The Invisible Hand“. The results would be as described in the article, with reduced economic output, greater suffering and dependency. The second item is another pillar of economics “Autonomous Reallocation of Resources”. This is a double edges sword affecting both accountability and value of resources. Trade is fundamental to a strong economy, and without competition there is no accountability, and the effect on trade can be devastating. Devalued resources, such as free labour can detract people from those industries, and in the case of low skilled workers reduce their living standards further, given they already suffer from the most difficult work with the lowest pay. Charities donating to poorer countries will have a significant effect on these pillars, and therefore have a significantly greater potential to damage the local economy and encourage corruption. In a hundred years of charities, donating money to poor countries, we have seen little improvement. In fact, we find countries with valuable resources or aggressive neighbours tend to be poor. We find that charities tend be symptomatic treatment of serious underlying problems, often perpetuating the condition, for example armed civilians taking charity from the weak, or charity undermining the local farmers and economy. Charities in larger countries have less impact and could arguably improve economic conditions through Games theory. To improve economic conditions, a charity would have to be providing a rebalancing, for example providing the poor with their basic needs would represent significant economic benefit, and counter balancing greed and power. In terms of supply and demand for the low skilled, by rebalancing it would act like a trade union on a monopoly, two imperfections, resulting in increased wages and increased output. The problem is that a charity is a Tax on the poor, and in the previous example we are actually describing a welfare state run by the government. The economic argument is bullet proof, and is some ways contradictory to points raised in this article; therefore I will offer a little more information. Firstly I would recommend understanding the principle of the “Invisible Hand”. Secondly I would recommend understanding the concept of “Full Employment”. Thirdly I would ask you to consider the economy, where everyone is working, and each are entitled to a percentage share. In the case you are able to do another person’s job more effectively, you should be entitled to take some of their share, in order that they let you do their work. My problem is that I believe that people who work for charities are doing good, something we as a society condone, therefore they deserve a fair wage. I also do not see much economic value, efficiency or stable income for charities, having people on the streets collecting money. In addition, charities to poor countries really need to solve the underlying issues, and to do this, we really need the government. The government bids contracts, these are targeted and accountable and surely represent a better more economic and humane solution. We are in the 21st century, if anyone deserves our support, then they are not a charity case, it is their right. The 21st century person will contribute a percentage of their income in tax, the 21st century person will support those who are struggling, and the 21st century person will expect the government to be accountable. I for one have a great deal of respect for the UK Government, they are not perfect, but they do represent one of the most established and advanced in the world. You may donate a little money to quell you concious, truly without thining, but the government ensures that the weak are protected,

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