How to create inflation when kindness was intended – unintended consequences 2

A peculiar irony of charity is sometimes you get the unintended consequence of creating problems when you are trying to help someone.

I have several things to say on point. Currently I’m reading Toxic Charity: How the Church Hurt Those They Help and How to Reverse It, by Robert D. Lupton.  Very sobering – $11 on Kindle.

Before I talk about Mr. Lupton’s book (and I’ll have *lots* to say), I wanted to share an experience I had a long time ago.

While working at another CPA firm, I had the incredible, delightful opportunity to do several audits on the overseas operations of a large international NPO.  Their name doesn’t matter, because they are not part of the story.  I have tremendous respect for them and the work they are doing. If you have known me a while, then you know who I am talking about.

On this trip I was working.  Wasn’t mission-tripping.  Wasn’t voluntouring. I was getting paid to do audit work. Just wanted to point that out.

On all those trips, I kept my mouth shut when I wasn’t doing audit work.  I kept my ears and eyes wide open.  While listening, I heard this story.

The location I was auditing had half a dozen US families assigned to the program. There were a number of national staff working for the program as well. This program was in a modest-size village.

In this village, you could buy your vegetables from vendors who carried their merchandise from house to house. They would knock on your back door. You could check out the merchandise, make your selections, and get all the fresh fruit and vegetables you want.

Prices? Astoundingly low based on what an American or European would expect to pay. I don’t recall the prices but think they were in the range of a few pennies per pound.  You could spend $.25 or $.50 and have all of the fruit and vegetables you need for a day or two.

Well, that seems like it’s not a lot of income for someone who’s working all day in their little farm. So some of the US missionaries increased what they paid for produce. They started giving a whole dollar bill to the vegetable vendors no matter how little they bought.  That should help those hard-working farmers and make life a little easier for them.

After all an extra $.50 a day for vegetables is inconsequential in relation to a Westerner’s food budget, right?

And you are helping out those poor farmers, right?  Improving their standard of living, right?  Getting more money flowing in the local economy, right?

How could there possibly be a problem with that generosity?

No problem at all. Until unintended consequences arrived.

Everything was fine until the national staff talked to the missionaries and asked them to stop overpaying for vegetables.

Why?

Because the national staff could no longer afford to buy vegetables for their families.

Turns out that the vegetable vendors concluded the value of their produce was higher than what they had been charging by a factor of two or three.  Quite reasonably, they started to expect all the national staff to start paying the same price.

Costs of vegetables went up.  The national staff, who were compensated attractively compared to local standards, could no longer afford to have vegetables and fruit in the diet.

Why couldn’t they buy produce for their families?  The cause was the kindness of the missionaries, which created tremendous inflation for vegetables in that entire village.

The US staff cut the amount they paid for vegetables. They insisted on the old prices. The vendors dropped the prices for everyone else. Then the national staff could afford vegetables.

It is really weird to think that being very generous to the vegetable vendor at your back door would damage the diet of the national workers and their families. That’s the effect of unintended consequences.

Previous post on unintended consequences is here.