The Effects of Charities on Rural Economic Development

The Effects of Charities on Rural Economic Development: An Analysis of the Outcomes of Charity Involvement and the Reduction of Local Economic Growth Joshua Drouin Dr. David Eaton This research examines the impact of charities and NGOs on economic development in areas served by the charitable groups. We will look at both long term NGO and charitable involvement, as well as disaster related efforts. By drawing on the comparisons we can empirically test the Samaritan’s Dilemma put forth by James Buchannan. This hypothesis suggests that while charity actions can help in the short term, they can lead to long term dependencies. By providing necessary services for free, charities undermine local entrepreneurs and hinder industry and business creation. Without businesses to sustain a community, people are unemployed and hence cannot purchase goods. Subsequently, charities see this hardship that people are facing and seek to help them, and so the cycle continues. This issue can arise even assuming that charities are acting with benevolent intent and without corruption. There is an optimum point of aid in which communities can survive hardship just enough to recover and begin sustaining themselves, but any aid beyond this point removes profits from the markets and dissuades entry. Thus, the optimum point of aid is the point in which local individuals can realize the profits and obtain them, without removing the profits. This paper will primarily focus on charitable and NGO involvement in rural areas in Africa and East Asia