April 12, 2008

Dear global political economy people, positive gift economy people, and Suzanne Stevens,

I have known of the Heifer projects for some time, and I was interested that Bernadette forwarded a link to their website to us.

However, when I looked at their website I was disappointed.

I was hoping to find that the foundation was encouraging people to produce food for use.  I was hoping to find encouragement of gift giving.  I was hoping to find building cooperative relationships of mutual support regardless of money transactions.

Perhaps there was some of what I was looking for.  Perhaps reading between the lines one could find it.

But for the most part , what I found was the same sort of illusions that characterize the efforts of the Salesian order and unfortunately those of the project of our friend Victor in Colombia.    People think they are contributing to ending poverty by encouraging people to produce for sale.

Perhaps poverty is reduced somewhat in these ways.  Insofar as there is an increase of the net availability of food there is probably some small decrease in poverty.  Say´s Law is not entirely wrong.  To some extent, the mere increase in supply increases demand.

But, although not entirely wrong, it is wrong.  (See Keynes General Theory for the classic refutation.)

The cause of poverty is not for the most part on the production side.  It is on the demand side.  Amartya Sen demonstrates this is in his study of famines.  Famines are not due to lack of food.  They are due to lack of money with which to buy food.

One might say that this is just what Heifer is doing.  It is helping poor people get money.  This is not entirely wrong.  The effect, however, is short term only, and it will not end poverty.

There is a logical flaw in common sense here.  Common sense tells the Heifer people, as it tells the Salesians that when they help a person get an income they are decreasing poverty.   They can "prove" it with photographs of people who used to be poor but are not poor anymore "because" a family got a heifer,or a young man or woman was trained to have a marketable skill.

The fallacy in the proof is that in many cases there is already food on the market being produced by others.   There are already people with skills trying to sell them on the labor market.

When you add to the supply and demand is insufficient, it means that when you make a sale somebody else does not.  Some young man trained by the Salesians got a job, but since the number of jobs did not increase, somebody somewhere lost a job or failed to get one.  Somebody sold a lamb, but since the demand for lambs did not go up, the price of lambs went down, and some producer somewhere sank deeper into poverty because the price of her or his product went down.

There are good examples around the world in the dairy business.  It provides dramatic examples of people who cannot make a living producing milk not because they do not know how to dairy, and not because they do not have cows, but because the price of milk is too low.  (See the film Life and Debt on the destruction of the native Jamaican agricultural economy by US interference in demanding “market share”.)

I believe the right answer on how to end poverty was given by Mother Teresa, "Poverty will end when we learn to share with the poor."   It was also given by Karl Marx and others who showed that we need to learn how to produce for use, to meet needs.

Mother Teresa´s approach does not need to be just charity which demeans people by giving them only a passive role in their own rise from poverty.  It can mean many active roles.

I am sure raising animals could be combined with reviving traditional patterns of gift giving and reciprocity.   I believe Heifer was originally a Christian project and that it was combined with promoting the sharing ethic found in the gospel of Luke, the Acts of the Apostles, and the letters of Paul.

From their current website I have the impression that Heifer has taken to appealing to the economic ideas prevailing among donors by echoing standard economics and standard individualistic ideology.  It is full of talk about self reliance and value added.  It seems to be all about preparing products for sales in markets.  It seems to encourage the beliefs of people who are comfortable, who became comfortable by hard work, and who think poverty could be eliminated if everybody could be taught to be like them.  It seems to encourage the belief that the people’s economy, where the main asset is work, is just a small scale version of business, the same thing as an enterprise seeking profit, where the main asset is capital and labor is regarded as a human resource, an input to the money-making process.   It seems to be recruiting the donors and the poor themselves to be believers in the dominant ideology.

All of this would be fine if the dominant ideology really could bring peace and justice to the world.  However, it is not true that there are unlimited opportunities to start profitable small businesses, and that if donors just gave the poor a little help the poor could all start small businesses, make profits, and rise from poverty.  However, the capacity to make profits in this world is limited by demand.  It is not just limited by supply.  It is not just limited by lack of education and lack of skill and lack of knowledge of marketing and knowledge of how to write a business plan.

I am afraid that Heifer has gone the way of the Salesian Order.  It should not be surprising that in spite of hundreds of success stories of individuals rising from poverty and in spite of thousands of glossy photographs and many statistical studies showing the "impact" of alleged anti-poverty programs, poverty still persists year after year and century after century.

There is no good reason for poverty to persist.  There are plenty of resources.  It could be cured with the money now spent on arms.  It could be cured with money now spent on private automobiles.   (I am curing it myself in my own neighborhood with money I do not spend on having a car --but I am not doing it by financing micro-businesses, but rather by encouraging gift giving.)  It could be cured with the money now spent on pets, on vacation homes, on sports arenas.  There are more than enough resources.

What largely holds us back are the fallacies that prevent the good intentions of people like Bill and Melinda Gates from being effective.   Donors think that to take people out of poverty they have to make them " self reliant."  To be "self reliant" they have to sell something.  To sell something they have to have a baby lamb to raise for sale or they have to learn to repair TV sets so they can sell their skill.  Massive good will leads to massive illusions, and massive poverty persists.

I imagine that this e-mail will result in confused and perhaps angry replies from several people.  I hope the ensuing discussion will produce more light than heat.

I would like to make some concessions at the outset.

One concession is to existing culture.  The poor people believe the dominant ideology as everyone else does.  They want a chance not charity.  They want to be self-reliant.  They want a job.  They want to sell things.  It is necessary to fit in with the existing culture in order to transform it.  A good example is in the city of Rosario´s urban agriculture program, where poor people get a number of hidden subsidies, but nonetheless believe in accord with prevailing culture that they are pulling themselves out of poverty by their own bootstraps.

Another concession is to Say’s law.  It is not one hundred percent wrong. Increasing productive capacity does have some tendency to increase total consumption, even though it does not break the barrier that only counts as productive what is sold on a market.    This is especially the case in highly equal societies where everyone is equally poor.  It is less and less true as inequality sets in and large amounts of money in the hands of the rich become a drag on effective demand.  It is less and less true as employment comes to depend on the expectation of profit and therefore on future sales -- which will never be enough in fact to employ everybody.  It is less and less true as the economy comes to depend on what Keynes called confidence.

It is true that we need a mix of strategies to end poverty.  But it is also true that the present mix is short on creative ways to learn to share with the poor.

Howard R.

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Dear Howard,
I think your remarks are very interesting and mostly right on. One thing I would say is that the problem is not demand but effective demand - counting a need only if people have the money to buy something to fill it. The whole issue of the evaluation of things  according to money is so misleading, as the monetization of housework issue shows. 40% more would have to be added to the US GNP if housework were counted in monetary terms (its even more in some other countries). For a long time there has been a movement for wages for housework. But actually without the subsdy that women are giving to the market with their free gift work, it would probably not function at all. Microcredit is similar to your Salesians and to the Heifer project. The solution to the problem of poverty seems to come from what is actually causing the problems. I think this is because we believe in the exchange paradigm and cannot see the gift economy or its values. That is because the market functions on taking or hiding gifts at the same time that it puts exchange in the forefront of all our thinking. I recently saw a presentation on tv of an economist named Tim Harford whose new book The Logic of Life (what a title!) says that all decisions are made by cost benefit analysis. I think gift giving is the logic of life.
Anyway thank you for your letter which I think does a good job of defending the gift economy rather than money making as a way to address poverty. I am pasting it below for people on the gift economy list who did not receive it.
Peace
Gen

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