Most philanthropists want to be effective altruists. The problem isn’t intention; it is measurement. Unlike financial investing, which has reporting standards, audit processes, and educational requirements, social investing is notoriously tricky to evaluate. As a result, for much of the history of charitable giving, spending was a proxy for effectiveness: the more money that went into programs instead of overhead, the more effective the charity.
Thankfully, new technology-driven approaches—such as using mobile phones to collect outcome data—have chipped away at this outdated model. Most of us working on poverty alleviation simply want to know, “How much poverty can I reduce for every dollar I donate?” Peter Singer mentions GiveWell as a pioneer; other people and organizations have worked on this problem over the last decade, including MIT’s Poverty Action Lab and Yale’s Innovations for Poverty Action.
Creating living-wage jobs for poor people is the best ethical choice.
Though we should be grateful for these improvements, we should think beyond short-term gains for the poor, a trap many effective altruists fall into. Take Singer’s imperative of maximizing income in order to maximize donations. Suppose after college I take a high-paying job at a private equity firm. What if that firm invests in companies that produce the very negative social outcomes my donations are supposed to fix? For example, what if the firm invests in companies that lobby to undermine needed agricultural reform? Experts recognize that Western agricultural subsidies devastate local food markets and cause food insecurity in poor countries. Over time, my contributions may be a net negative.
There is a more fundamental problem with Singer’s approach. It sorts people into the helpers and the helped, which reinforces prevailing beliefs about the best way to generate and distribute wealth instead of questioning what led us here in the first place.
Rather than try to do the most good as quickly as possible, I suggest a long-term focus that leverages social business. Singer alludes to this concept in discussing a factory in a poor country that pays living wages and reinvests some profit into community initiatives. For Singer, the entrepreneur who established the factory will live a “minimally decent ethical life.”
Creating living-wage jobs for poor people, so long as one avoids negative social and environmental externalities, is the maximally decent ethical choice. Such organizations also achieve more for each donor dollar. Since the costs of poverty alleviation are offset by revenue, donating to that factory to set up a health initiative for workers, say, would go much further than donating to a traditional nonprofit.
Social business lies in the spectrum of possibility between the traditional, profit-maximizing business, which directs little to no profit to doing good, and the traditional charity, which relies mostly on donations to sustain itself. The social business I run,Samasource, derives a large portion of its operating budget from earned revenue. Samasource’s largest clients are technology companies such as Microsoft, Google, Getty Images, and TripAdvisor, which contract with my company rather than a traditional outsourcing company in order to participate in “impact sourcing”—conscious efforts to reduce poverty by moving money into places that need it. Samasource hires poor people in northern Uganda and trains them to provide services to these firms, moving women and youth above the poverty line with money that would otherwise have gone to a different vendor without a social mission. Since it costs more to hire and train poor people than middle-income people, the alternative vendor would most likely be a traditional, profit-maximizing outsourcing company.
The second benefit of the earned-revenue approach is the freedom it gives the helped to determine their own fate by investing in the goods and services they choose. Studies have found the benefits of wage earning to include reduced incentives for labor and sex trafficking; reduced birth rates and rates of child marriage and teen pregnancy; participation in banking, savings, and insurance programs; and the growth of taxation systems.
This last point is vital. The taxes levied on living wages fund important public goods and services—the kind of infrastructure that enables long-term poverty reduction. It also fosters a healthy relationship between poor people and their elected leaders, who should be accountable to their people rather than foreign donors.
We should strive to be effective altruists. But efficacy may mean more than increasing how much we donate or picking certain recommended causes. Effective altruism should force us to shed many of our ideas about giving, which undermine poor people’s ability to lead healthier, more fulfilling lives.