Is there a “poverty industry”?  Is the way we attempt to alleviate poverty wrong, outdated, even harmful?  These are two questions the new documentary Poverty, Inc.  attempts to address.  I had the opportunity to host a screening this video documentary at Cedarville University, sponsored by the Department of History and Government and the Institute for Faith, Work and Economics a few days ago before over 160 students and faculty.  It runs about 90 minutes and consists of narration, interviews with actual residents of developing nations, and interviews with development economists, as well as a good deal of excellent data on poverty and the structure of poverty agencies, both governments and NGOs.  The movie was produced and directed by Michel Mattheson Miller in collaboration with individuals at the Acton Institute.

The overall thesis of the documentary is pretty straightforward.  Both the way we have thought about economic development and our practices of addressing poverty since World war Two have been wrong and have generally produced negative results.  To explore a bit, the work argues that for the most part poverty resources have been given either by a government to another government or by Non-Governmental Organizations (NGOs), and mainly as gifts or transfers.  By structuring poverty relief this way wealthier nations and NGOS have created a culture of dependency among the indigenous people, which stifled industry and entrepreneurship.  As a result poverty has not really dissipated but has persisted.  These consequences may have been unintended, but nevertheless very real.  Moreover, when funds were transferred directly to governments of other nations, often those funds were simply kept by dictators and distributed to their cronies to keep them in power. Again, poverty persists.  In addition, the NGOs themselves appear to have been co-opted by the incentives created and are as addicted in many cases to the money they get as the recipients are.

The solutions explored are multi-faceted, but boil down to two main ones: (1) change the institutional structure of nations, admittedly a very difficult process and (2) stop the flow of “free stuff” that disincentivizes productivity and entrepreneurship.  Examples in this video included the story of Tom’s Shoes and others who simply gave away shoes or clothes and in the process “killed” native industries in countries.  Without these disincentives, the people of a nation would themselves be opening new businesses and industries—as a few examples also showed.

If this approach catches on, which I believe it will, then development economics will be radically changed for the better—assuming national governments can also be brought along.  Experts in this video lent some very hefty weight to the new paradigm.  Mohammad Yunus, Hernando de Soto, Paul Miller and others explained very clearly how the old ways failed and how the new approach was so important.

Now nom one argued that aid to nations should be stopped in every case.  Situations of catastrophic weather events or earthquakes (Haiti) require short-term aid to help get people back on their feet. But once that has happened, allow the people to control their own destiny.  And if aid is desirable, change the nature of it, for example, investing in factories or businesses with loans or directly establishing them in the respective countries.  Loans need to be both small, medium and large, to fit all types of entrepreneurial needs.

Finally, I would argue that this new approach has application to our thinking here in the United States as well.  Our inner cities are “broken” and the typical approach of the last fifty years, the Great Society approach, has not worked, even after more than $20 trillion has been spent.  We need to make the residents of those cities self-sufficient and self-governing, so that they themselves can bring to bear their own skills and creativity.  This of course does entail basic public services, but it means an end to “give-aways.”

One more issue that looms large in all this.  That is the institutions of countries.  I have no easy answer to this problem, but what is needed includes clearly defined property rights, a functioning rule of law and court system that is not corrupt, contract arrangements that can actually be enforced, among others.  This means addressing the larger political dysfunction of governments, particularly their culture of corruption.  No simply task, but essential.  This problem also arises in the United States itself, where crony capitalism leads Congress to collude with businesses and industry to use tariffs and subsidies to harm the overseas efforts at entrepreneurship,  This has to stop too.

At any rate, Christians ought to embrace this approach also.  The verse, “If a man will not work, he should not eat” is not designed just to make people miserable, but to provide the necessary incentive to work, the side-benefit of which (implanted by God) is to attain dignity as a human being.  Yes, we ought to be vitally concerned with the poverty issue, but the question is the best way to approach the problem.  For too long, even Christians and churches and religious organizations have followed the old model.  I contend this model is not biblical.  It is time to change our paradigm—for the sake of the world—and without compromising our proclamation of the Gospel.