Poverty, Inc.: The Business of Global Aid

This documentary reveals the uncomfortable reality of our failing global aid system.

“The reason there will be no change is because the people who stand to lose from change have all the power. And the people who stand to gain from change have none of the power.” –Machiavelli

Poverty, Inc. opens with this Machiavelli quote, a reference to the modern global aid system. Since the documentary was released in December 2014, it has earned 30 international film festival honors for its critique of the foreign aid ecosystem. The film, directed and produced by Michael Matheson Miller, explores the idea of aid from the receiving perspective, rather than the giving side, through the voices of ‘beneficiaries’, expert opinions, and data.

The current conceptualization of international development emerged as an American economic support initiative – aimed at promoting peace, foreign policy, and general welfare – in war-torn Western Europe. Enacted in 1948, the European Recovery Program (or, the Marshall Plan for short) was a four-year plan to rebuild war-devastated regions of Europe, remove trade barriers, modernize industry, and prevent the spread of communism.

During this period, Europe experienced the fastest growth in its history, including booms in industrial and agricultural production. Poverty and starvation were greatly reduced and the standard of living sharply increased. Scholars disagree about the impact the Marshall Plan had on Europe’s economic recovery. The conventional view holds that the Plan accelerated Europe’s economic revival, while the other side argues that Marshall aid stunted Europe’s growth. Most agree, though, that Western Europe was poised to rebound from the war prior to the influx of foreign aid and know-how from the U.S.

European countries were not the only ‘beneficiaries’ of U.S. aid. The Plan had obvious political economic advantages for America, including the advantage of determining targeted areas of development and deciding rigorous conditions on funding. Conditional aid encouraged protectionist European nations to incorporate free trade policies and practices, which ultimately proved profitable for American producers and manufacturers. European nations importing certain types of raw materials or manufactured goods, such as fuel or food, had to buy them from American-controlled suppliers.

Countries receiving Marshall aid were also obliged to participate in the U.S. technical assistance program. The U.S. government sent technical advisors to observe European workers in the field and provide on-site analyses with the aim of increasing efficiency and labor productivity.

Despite the controversy over its impact on post-war Europe, the Marshall Plan has become the model for foreign aid policy since its implementation in the 1940s. The formula for success centers around the role of the West, and specifically the U.S., as a supplier of international aid. This Western-centric notion of economic and technical support – wherein developed countries deliver conditional aid and ‘expertise’ to poor, war-torn, developing nations – has created a paternalistic system that tends to ignore the achievements of foreign aid (or lack thereof) from the end user’s point of view. Through this lesser known perspective, Poverty, Inc. sheds light on the uncomfortable reality of the global aid system that has failed to lift the poor out of poverty.

The film argues that poverty has evolved into a business for wealthy Western countries. The poverty industry consists of non-profit organizations, for-profit contractors, and charities that thrive by reinforcing the narrative of developing countries as destitute and their people dependent. Those who profit from the industry tend not to be the people who are supposedly being helped. Instead, the system perpetuates, rather than changes, existing power dynamics by creating material and mental dependence on donors.

Take Africa, for example. Since the 1960s, Africa has been among the top recipients of U.S. aid. In 2012 alone the U.S. dispersed over $9 billion in official development assistance (ODA) to Africa, the largest amount of ODA from any Western donor country. Despite this, the majority of African nations remain among the lowest on the Human Development Index (HDI). Considering the massive amount of aid that pours into developing nations each year, why haven’t the poor been able to climb out of poverty?

Poverty, Inc. does not attempt to chronicle the whole story of poverty, development, and NGOs in 90 minutes, but it does underscore a few of the myths that have allowed the current power dynamic to exist and persist.

Myth #1 Most foreign aid reaches the people it is intended to help.

Source: Investments to End Poverty

Source: Investments to End Poverty

Aid is not a large cash lump sum that passes directly from the donor to the recipient. The funding chain is lengthy and complex, and current reporting practices only track the initial transaction between the donor and the first aid recipient. First-level recipients include governments, multilateral agencies, NGOs, and for-profit contractors. There are no systematic reporting practices that reveal what happens after that point. Moreover, some aid is never transferred outside of the donor country but is instead used for debt-relief, supporting refugees, and development awareness. The Investments to End Poverty report “unbundles” the many forms of aid and uncovers the discrepancies between official aid statistics and the actual resources transferred to developing countries.

Myth #2 The West knows what’s best for the Rest.

This colonial-era mentality dominates the donor community’s approach to aid. Western governments assume they know enough to figure out global solutions to poverty and determine what needs to be supplied. While prescribed interventions may be well-intended, they are often misaligned with the culture and needs of the local community. National and local organizations are widely recognized as having a key role in development, yet generally receive only a small portion of aid.

Myth #3 The poor are lazy.

Aid perpetuates dependence and provides little incentive to innovate or work. Poverty, Inc. highlights several examples of unintended consequences of international aid that have conceivably done more harm than good by creating dependence on the donor. Companies like TOMs, for instance, donate a pair of shoes to children in need for every pair it sells. The film points out that those donations can end up hurting local workers whose products have to compete with free handouts from TOMs. Local merchants may go out of business. Furthermore, recipients may heavily rely on routine shoe deliveries; but, what happens when the delivery truck does not show up as expected and all of the local merchants have gone out of business?

What can the average person do to change the defective model of global aid? Check out Poverty, Inc. on Netflix, iTunes, or Amazon to learn more about how you could be part of the problem and the solution.

Films from the Bucket
Ashley Miller

Ashley is a researcher and global education advocate with a B.A. in Public Policy Analysis from the University of North Carolina at Chapel Hill and M.A. in International Relations from Institut Barcelona d’Estudis Internacional. Her studies and travels inform and inspire her interests in international education, social justice, economic empowerment, and human rights. To connect with Ashley, send her a personalized message on LinkedIn: https://www.linkedin.com/in/ashmil.
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