The main focus of the recent Make Poverty History campaign was a call for increased government aid to under-developed nations, but there may be a better way to help the poor. When government aid is provided to developing countries, the connection between the ultimate donors taxpayers - and those receiving help is tenuous in the extreme. If I vote for an increase in taxes, to fund development aid, the extra money will be gathered by the Inland Revenue and passed to a UK Government department. The UK government may then pay the money to a multi-national agency which, in turn, will feed it through the developing country government to be spent, after a further series of bureaucratic steps, on projects designed to help the poor. It is not surprising that a recent aid project to fund Ugandan schools saw only 13% of the money reach the schools themselves. It is also not surprising that there are genuine concerns about the institutional effects of aid. If over-powerful, corrupt governments are a major cause of poverty, then aid can entrench and give more power to the very institutions that create poverty.
Indeed, the lines of accountability in the case of such aid-financed projects are very tenuous indeed or perhaps non-existent, or even perverse. When politicians make the case to voters for increased aid, they generally do so on the grounds that the recipients of aid are very poor. It is almost unknown for politicians to justify more aid on the grounds of the success of previous projects that have been financed by aid. Taxpayers and voters are unable to hold governments to account for the success, or otherwise, of aid projects. Charities behave very differently. When appealing for our money and time, which is voluntarily given, they have to demonstrate how successful they have been with past donations. Charities measure their success in terms of how much they deliver whereas governments measure their success in terms of how much they spend.
It was, perhaps, surprising that, in the Make Poverty History campaign, there was barely a whisper about the benefits that might flow from philanthropy and Christian charity: particularly given the involvement of churches in the campaign.
Philanthropy can be far more effective in helping the poor. It involves direct help given by people to the intended beneficiaries. It works from the bottom up. It by-passes the rich and politically powerful who cause so many problems for poor people in poor countries. A charity may, of course, stand between the donor and recipient as an intermediary, but philanthropy involves the provision of direct help and we can be pretty sure that the assistance given will efficiently reach the intended beneficiary.
Why did the Make Poverty History Campaign focus on aid rather than philanthropy to address the problems of the worlds poor? One explanation is that, in the economic jargon, philanthropy involves free riders. You might dig deep to help the poor, but your neighbour might choose not to bother. The more you help the poor, the less your neighbour needs to help. Everybody leaves it to everybody else and there is less philanthropy than might be ideal. Whether we rationalise it this way or not, we may feel helpless how can our little bit help eliminate the terrible scar of world poverty?
In fact, all the little acts of philanthropy and some big ones add up to a great deal. One single US charity, the Rotary Club, financed over one fifth of the cost of eliminating polio in the world. Another Rotary project, Rotarians Against Malaria illustrates the effectiveness of on-the-ground philanthropy. Malaria kills more than one million children a year. The provision of mosquito nets impregnated with insecticide to 50% of the people living in a given village can lead to massive reductions in malaria in that village. The nets cost £2.50 and last about five years. When US Rotary became involved with a project in Ghana to distribute mosquito nets, they were ordered, manufactured, shipped half way across the world and distributed at a cost of 15 pence each less than 10% of the lowest cost ever recorded in any previous project. In this particular project every single net was personally recorded as having reached its intended recipient. Rotary claim that their main contribution was not money, but on-the-ground philanthropy and entrepreneurship that led to money being spent wisely.
Indeed, this is an important point. Charities use a wide range of talent as well as money to pursue their objectives. Donations of time whether in the donor country or in the recipients country - are as important as donations of money. People who donate time, like those who donate money, do not want to see their efforts wasted. Those who assist charities also have a wide range of entrepreneurial skills and this ensures that many charities nurture small-scale entrepreneurship and thus encourage sustainable economic development.
Data on the total amount of philanthropy are pretty scarce in Europe, though it seems clear that European citizens are much less generous than US citizens. But, there is reasonably good information on US philanthropy, thanks partly to a Hudson Institute research project. The total volunteer time given to developing countries by US citizens in 2004 was equivalent to 135,000 full time workers.