Why Nonprofits Will Never Solve Poverty
The unintended consequence – victims
600 million people came out of poverty in China in just 20 years. Nonprofits (and giant corporations) weren’t the reason. It was all ugly, evil, horrible, and very local, capitalism.
Between 1981 and 2004, Chinese poverty dramatically and suddenly fell from 85% to 9%, the majority of it happening long before western companies started building there. And not a single non-profit or giant corporation can take credit. Africa, a hotbed of nonprofits, is quite a different story.
For many decades Africa has been the focus of every major nonprofit and the financial aid of most nations. When China’s poverty was 85% in 1981, Africa’s was 40%. Today it’s still 40%, except that 150+ million more people make up that percentage than in 1981 because of population growth.
We can debate whether free aid and nonprofit money is THE cause, A cause, or not a cause at all, but one thing is sure, it is not a solution. Why?
The Downward Spiral of Victimology
It all starts with a nonprofit “gift”. Gifts are a wonderful thing because they are not expected, and when applied to crises, they can lift the human spirit and get people over the hump, which brings immeasurable value. Nonprofits are great on the front end of short-term crises such as famine, pestilence, natural disasters, epidemics and war. But they stay too long.
A gift given often enough and regularly enough, becomes an expectation. Given more time, an expectation eventually becomes dependency, which eventually becomes an entitlement, which turns me into a victim when it’s no longer there.
The Upward Spiral of Ownership
In 1980 the Household Responsibility System was enacted, allowing the rural Chinese to dissolve the collectives that produced entitlement and victimology, and allowing them once again to own land and businesses, and take responsibility for their lives – to become capitalists. An astonishing 40% of the reduction in Chinese poverty came in the first three years after the HRS created local ownership, and long before giant corporations swooped in or exports started to roll out. It was local, small capitalism, millions of small and local businesses springing up, that took 600 million people out of poverty in the wink of an eye.
Rwanda’s largely corrupt government opened their borders to American and UK business people a couple years ago and have made it extremely easy to start and own a small and local business. Somewhere between 1-2 million people have come out of poverty in that very short time.
The answer isn’t government aid. It isn’t giant corporations pulling the value out and taking it to the west. And it isn’t nonprofits staying in an area for decades creating dependency, entitlement and eventual victimology by their continued presence. The answer for Africa is the same as it has been for China, India, the United States and any other economy – millions of small and local businesses are the only thing that will solve long-term, systemic poverty.
The answer is in the willingness to build businesses in Africa – real businesses, not micro-financed lifestyles, but businesses with 5-50 employees, that can be bought and sold and inherited and expanded. There is enough socially conscious money flowing into Africa right now to do it, it’s just going to things that won’t solve poverty. And when the money starts flowing into businesses, it MUST be accompanied by training. In Africa (and everywhere) training to run a business is even more important than loans to build them. As one African said, “As harsh and counter-productive as it might sound, don’t send us your money; use it, rather, to pay your doctors, engineers, farmers, businessmen and the like to come to Africa for at least a year at a time to teach us how to do things for ourselves.”
I believe there is a whole new wave of business owners coming up who will, instead of giving money to nonprofits, will risk investing $10-$50,000 in building businesses in Africa and, more importantly, invest time there (and on Skype, etc.) training others to run and eventually own those small and local businesses.
600 million people came out of poverty in just 20 years in China through ugly, evil, horrible capitalism, and none of it was intentional. What if we did it intentionally in Africa? I believe with that approach we can do something nonprofits haven’t been able to do for over 100 years, solve systemic poverty among the 500-700 million impoverished Africans. And we can do it in under 20 years.
PurposeWithAProfit.com – coming soon.