Paros Foundation and Bad International Aid

The Paros Foundation, a fund focusing on providing aid to Armenia, recently donated 25,000 shoes to children in need. This will have a positive impact on the immediate living conditions of the children, a negative impact on the local economy, and potentially even a negative impact on the long-term conditions of the children.

TOMS Shoe Company was one of the first with the idea of donating shoes to impoverished areas. Like Paros, while TOMS has a noble goal their approach is ineffectual or even counter-productive. Thankfully for me, people have already criticized TOMS for their ineffective aid and those criticisms are easily available on the internet.

First, the issue isn’t that children don’t have shoes but that children live in poverty. Poverty will only be eradicated in the long-term through promoting local economy and effective resource distribution. Paros Foundation states that “some shoes will be purchased in Armenia [improving] the local economy” but they don’t mention what percent of the funds will go into the local economy or even what guidelines they’ll follow for primarily buying local. Also, there is no analysis of how much local cobblers will be hurt from a flood of shoes into the area. It’s possible that some cobblers will go out of business because of the lack of demand.

A second major issue is that Paros is creating dependency. It’s rational to not pay for something when someone will give it to you for free. When these shoes wear out in a year, it’s rational that the orphanages won’t buy new shoes in case Paros is prepared to provide thousands of new shoes again (assuming the orphanages raise enough money to do so). Paros can tell them that this is a one-time-deal and will never be repeated, but then they’re admitting that they’re just providing a band-aid to the real problem.

To not finish this post with cheap complaints, an alternative approach should be discussed. In the case of TOMS, providing cheap shoe-making material and free shoe-making classes would develop vocational skills, self-sufficiency and provide for more shoes in the area without promoting dependency. In the case of Paros, while giving kids shoes paints a lovely picture for the media and future donors, it could have used the donated money for some long-term project that produces long-term benefits.

When discussing policy choices, one often wonders about the multiplier effect: for each dollar spent, do I get more than a dollar of impact because of the multiplier effect? Green energy is often touted as having a high multiplier because of all the benefits that can derive from it. Here, Paros can look at what investments could have a large multiplier and do that (e.g. new water piping system, new community center, providing local schools with funds to hire more teachers, etc.). The problem is that these types of investments are harder to do and much less glamorous than simply giving kids shoes.

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