June 20, 2005
Marginal utility of charity
The problems in Africa have been a major component of international news and debate as of late, especially regarding foreign aid. It has stirred the debate over whether or not industrial nations like the US are “doing enough”. Typically this brings out the statist crowd, who believe that our official governmental foreign aid should be increased to help the poor, starving people of Africa. They’re countered by the religious charities and small-government folks like me, who point out that while America’s per capita government aid is not large, our private donations are staggeringly large.
This first link, from what appears to be a heavily leftist Jewish weekly magazine in New York called Forward, says this:
For $15 billion a year, or about 15 cents a day per American citizen, the recovery could begin.
Americans are willing. Our government needs to know that.
We might start by mailing, each of us, a nickel and a dime to the White House, with a note telling our president to stop nickel-and-diming the world’s future.
And from the second link, right-wing op-ed writer Bruce Bartlett:
Another thing one notices is that the foreign aid data are only for “official” (i.e., government) aid. The data are sketchy, but by all accounts Americans are far more generous in terms of charitable contributions than the citizens of any other country. A 1991 study found the United Kingdom to have the second largest percentage of private charitable giving. But in 2003, charitable giving amounted to 8.6 billion pounds or 0.8 percent of GDP in the U.K., according to the Charities Aid Foundation, compared to $241 billion or 2.2 percent of GDP in the U.S., according to the American Association of Fundraising Counsel.
I think that anyone who claims the US is “stingy” needs to back up that claim with another argument. Looking at the complete numbers, it is painfully obvious that America is one of the most generous nations in the world. But the claims of stinginess come from statists who only acknowledge official foreign aid. They believe that the way to improve America’s standing in the world and increase American foreign aid is to tax our citizens more heavily and use the US government to distribute the money. So the statists must not only show that aid is needed, but that governmental aid is more moral and more effective than private charity.
As I picked up from Scott Scheule, there are two claims required to support government intervention. The first claim is that a problem exists. Looking at the stories of Africa here, here, and here, that’s pretty apparent. Africa is an absolute hellhole, where the typical life, to quote Hobbes, is nasty, brutish, and short. The second claim, however, is a lot harder to justify. That claim is that government can fix the problem. Here is where it gets difficult.
Government is a bludgeoning tool, not a scalpel. Government can direct large sums of money where money is needed, but does little to oversee how it is spent. Government may send money “over there”, but we have no way to be sure that it gets into the hands of those who actually need it. Government, simply by being a monopolistic force which extorts tax dollars rather than competing on the basis of efficiency, does not have to show that their aid works, they simply need to show their voters that aid is sent. And the conventional wisdom is that official foreign aid sent to Zimbabwe, the Sudan, or other corrupt regimes will end up in the coffers of those corrupt regimes, not actually helping the citizens who need it. To support the claim that America is stingy based upon our official foreign aid, one must show that this foreign aid is doing more good than the private aid we send, since the amount of private aid is already large.
That claim is plainly not defensible. The advantage of private charity is simple: choice. When people have a choice over where to send their charitable donations, money will flow to the most respected and most effective organizations. Those donations, in order to maintain their status, have to continually show that they are being effective with those donations. They have a feedback loop, because keeping money coming in is not as simple as extorting it from taxpayers, they actually have to offer results. In addition, as Eric pointed out here, elected officials think purely in short-term electability, while charities think in long-term effectiveness. I think purely in terms of efficiency, private charities have enormous advantages. It is the difference between photo-op charity and people who truly believe in what they’re trying to do. Ben Sikma, writing for the Acton Institute, states:
Private giving, moreover, possesses certain advantages over public spending. People care when they give individually and on their own, personally involving themselves in the catastrophe and watching carefully to see that their money is used wisely. Too often public aid serves political purposes initially, and then devolves into a web of bureaucracy, where it is wasted or snatched up by oppressive regimes. As Friedrick Hayek observed, for lack of incentives and lack of information, central agencies have never been capable of effectively allocating resources—the UN’s Oil for Food scandal is just one haunting reminder.
One of the reasons that libertarians like myself are against governmental foreign aid is not that we don’t believe that helping others is right. While we do believe that forcibly taking money from citizens to provide aid is immoral, a portion of that belief is supported by our knowledge that people will voluntarily give enough aid in this country to make government charity as unnecessary as we find it immoral. For me, it comes down to a question of marginal utility. When I look at my own dollar, I ask myself whether that dollar can be used to help someone in Africa. If the answer is yes, I ask myself if it would be more effective to donate that money privately or entrust the government to distribute that money. And to me, that answer is obvious. I would rather donate my money privately than have it squandered as it moves through government bureaucracy. That dollar will do more good to the people who need it if I donate it privately. Part of libertarians’ opposition to governmental foreign aid, instead of the normal pejorative that we’re all selfish bastards, is the fact that we believe that we could do more good with that money privately than the government could do. Charity, to a libertarian, is not “waste”, but often the government is very wasteful with our charity dollars.
So you’re not going to see me wasting $0.37 on a stamp to send $0.15 to President Bush to signal my displeasure. Instead of “Forward” magazine getting up in arms over the lack of charity with taxpayer dollars, they would do better to give us a list of charities that they vet as being honorable and trustworthy with our money. I might then take their advice and send some money, and it will be a lot more than a paltry nickel and dime.
Libertopia linked with How poor is poor?
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How poor is poor?
Update: Warbs the Unrepentant has an excellent piece that juxtaposes private charity and government aid, with respect to solving the problem of poverty.
Let us assume for a moment that out of the US’s extremely generous “state charity”, your share (total aid/population) amounted to $5 per week.
Would you increase your charitable donations by $5 per week?
Second question, what would you say to all of those who grow the wheat, produce the food, that makes up the bulk of US aid? Y’see most of what the US provides is NOT (despite all rumours to the contrary) in the form of cash. A very very large proportion is in the form of excess production from US farms and businesses (it is known as aid in kind). Without that “market”, those farms and businesses would be in much the same situation as the Europeans, except that the US would not call their farm subsidies a “Common Agricultural Policy”.
Be careful what you wish for…
Bottom line: Africa is a hell hole because of African governments, or in some cases, the lack thereof. We can throw food and money in some places and it will just get consumed by people for whom it was not intended. Like the oil for food scandal. Unless we can bypass the governments and the war lords, there is not much we could do. At some point, every society has to step up to plate for itself. If it meant giving a few guns to the oppressed, and they could help throw off their own chains, that might be worth it. Liberating Iraq was/will be a lot easier than this task.
Keep the charity private.
Good piece Brad.