The Paradox of Aid

The “Paradox of Aid” states: “When the ‘conditions of development’ are present, aid is not required. When local conditions are hostile to development, aid is not useful, and it will do harm if it perpetuates those conditions.” (Angus Deaton, in “The Great Escape”).

This is, roughly, the idea we try to follow with the Fairdirect approach. It makes no sense at all to micro-manage others’ “development”, as in bringing courses, awareness programs, individual tools etc. to remote villages. Only to provide the conditions for development. That should of course focus on a localized area like a village to not be diluted too much, or it won’t be effective.

Providing the conditions for development is basically to offer people the opportunity to earn a decent amount of money, and educate them alongside how to invest their earnings wisely to raise their own living standards over time. None of this is aid, instead people are paid for what they produce. There’s not even a need to subsidize their products, just to pay them everything that is left after selling their product directly to consumers, at regular market prices. Which is 2-5 times what they get usually. People in “least developed” areas usually are farmers, which is one reason why, as Fairdirect e.V., we care about food products first.

Now after cutting out intermediate traders and paying farmers the most they can be paid of current consumer prices, many other things just fall into place:

  • Because farming suddenly became profitable, and they have some money over to invest now, farmers will look for ways to make their farming more efficient. The coffee farmers we work with from Hansapur (Gorkha, Nepal) for example are looking to purchase a coffee pulper. Usually they know the next steps to step up their production and where to get the required equipment, it’s just that they couldn’t afford to invest so far.
  • Because farmers have enough money to make a living, they will also invest into their children. In many developing countries, good education is a priority of parents, just unaffordable. When it becomes affordable, “the market” will create the supply in a short while, and kids will get a good enough higher education.
  • Education of these kids in turn allows them, when growing up, to earn enough to easily supply for their parents back home. Remittance money comes with its own issues and problems, but it is a self-earned pathway to development nonetheless.

Not too difficult, no? The difference between an international food system that empowers farmers to escape poverty and one that keeps them in poverty is not so much about final sales prices but profit retained in developed countries – exploitation due to market dominance. (Note that this analysis only works for areas where most farmers still have own land. After landgrabbing by multinational companies, or in a feudal system, different solutions will be required.)

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