An Economist Lifts the Veil to Expose Economists Causing Poverty

I like Dean Baker. He picks up a newspaper and immediately spots where and how the articles are lying to the readership. Here is a post on his blog Beat the Press where he takes the NY Times Nicholas Kristof to task:

Kristof's Misplaced Praise for Economists

NYT columnist Nicholas Kristof does not have a very good track record in identifying effective ways to help poor people in the developing world. (He was a big promoter of Greg Mortenson, the best-selling author of Three Cups of Tea, whose aid project now appears to be largely a fraud.) His column today indicates that his track record is not about to improve.

He urges people who want to help the world's poor to study economics and points to useful results that economists have uncovered. While the results he mentions are intriguing, Kristof somehow manages to ignore all the harm that economists have done in the developing world.

For example, the economists at the International Monetary Fund had routinely imposed structural adjustment programs that required that parents pay fees for their children to attend primary school. These agreement also often required fees for the provision of basic health services. This practice kept millions of children out of school and denied them basic preventive health care, since even small fees were unaffordable to many poor parents.

The practice was not changed voluntarily by the economists at the IMF. Rather it was a change that was forced on the institution by activists who were able to use their influence in Congress to require that the IMF stop making these fees a condition of getting loans.

At present, virtually all economists are making a point of not noticing the efforts of the United States and other wealthy countries to raise the price of medicine to people in the developing world by imposing patent protection. All the "free-trade" agreements that the United States has negotiated with developing countries have imposed stronger patent protection or other monopolistic restrictions (e.g. data exclusivity for tests used to get drugs approved) that typically raise the price of drugs by several thousand percent above their free market price. The TRIPS provisions of the WTO (which were drafted by the U.S. pharmaceutical industry) also were intended to have this effect.

While any economist (and most non-economists) should possess the ability to recognize the potential harm that these provisions can imply for the world's poor, very few have tried to call attention to these protectionist measures. It is worth noting that very powerful forces, most notable the pharmaceutical industry and the Gates Foundation, stand behind these sorts of measures. That could explain the reluctance of economists to apply economics to these issues.

Contrary to what Mr. Kristof suggests, the biggest obstacle to improving the lot of the poor in the developing world is probably not a lack of knowledge of economics, but rather the efforts of the powerful from preventing the teachings from economics from being applied in situations where it would hurt their interests.

Put Dean Baker on your "must read" list. He is a great antidote to the distortions and lie promulgated by the media.

I think it is ironicly appropriate that the IMF, which effectively raped small and defenseless countries around the world, was led by a man who has a hobby of raping the staff at expensive hotels.

I also find it odd how organizations which supposedly a dedicated to helping the poor and downtrodden feel obliged to give their leaders extravagant wages and treat them to 5 star hotels like the $3000/night Sofitel...

From a 2007 NY Times article:

The American Red Cross dismissed its president and chief executive, Mark W. Everson, yesterday, citing his “personal relationship with a subordinate employee.” He had been in office for only six months.

The news was another blow to an organization that has struggled to overcome criticism of its performance after Hurricane Katrina and other disasters, and it stunned the organization’s employees, as well as the nonprofit world at large.

From a 2002 CBS report:

The American Red Cross may be expert at responding to public disasters, but for years it has failed to get a grip on financial disasters at its local chapters.

There's the fundraiser in Louisiana caught padding her own bank account with donations, the manager in Pennsylvania who embezzled to support her crack cocaine habit and the executive in Maryland who forged signatures on purchase orders meant for disaster victims, to name a few.

But the biggest criminal scandal inside the Red Cross surfaced in New Jersey last year. And though it's been kept off the front pages, it ranks among the biggest charity frauds ever.

At the center of the scandal is Joseph Lecowitch, chief executive of the Hudson County Chapter, and his bookkeeper Catalina Escoto.

Escoto allegedly gave herself at least $75,000 in bonuses. All told, prosecutors say the duo stole well over $1 million in Red Cross funds, squandering it on gambling and each other. Escoto pleaded not guilty. Lecowitch died after he was indicted.

And here is a bit about the "salaries" earned by people running some big name "charities". From About.com:

As of 2005, these were the most up-to-date and trustworthy figures I could find for the executives originally listed:

Marsha J. Evans, President and CEO of the American Red Cross, was paid $468,599 in salary and benefits in fiscal 2003. (Source: BBB Wise Giving Alliance)

Brian Gallagher, President and CEO of United Way, was paid $432,709 in salary and benefits in fiscal 2003. (Source: Charity Navigator)

Fast-forward to 2010:

As of 2010, Marsha J. Evans, was no longer employed by the American Red Cross. According to United Press International, Gail McGovern took over as CEO of the American Red Cross in 2008 at an annual salary of $500,000 plus a signing bonus of $65,000.

Brian Gallagher is still President and CEO of United Way, and currently earns $1,037,140 a year, according to a December 2010 report from the American Institute of Philanthropy.

Pretty sad. Collecting small donations from cash-strapped people under the pretense of helping disaster ravaged others while siphoning off big chunks to support lavish lifestyles.