Giving vs. Selling

_Phil Storey — Tue, 23 Aug 2005 10:41:39 -0400

This is an interesting question. I'm not an economist by any means, but it seems to me that there's room for both free and purchased goods competing with one another. Right now in the US, anyone can walk into a health or family planning clinic and get condoms for free, but there's also a wide variety of condoms sold in stores. It seems like there's lots of room for product differentiation to drive purchasing decisions (even as simple a product as a condom is), and there are probably convenience and social stigma motivations for purchasing rather than getting them for free. I'd be inclined to think that mosquito nets and a host of other basic needs could be met through government and outside aid sources, but as economic conditions improve (partly thanks to the results of the mosquito nets and other aid) the market will create niches for competing products, perhaps without the need to totally eliminate the hand-outs. I'm sure there are other examples (besides condoms). I'd be interested to hear about examples to the contrary, as well. Phil Storey

The Business of Development

Rob Katz — Thu, 18 Aug 2005 09:39:44 -0400

Aid organizations sometimes face a catch-22: donate much-needed medical or food supplies, addressing today’s need – but by doing so, aid poisons the market for future sales (people won’t pay for what they’ve received free in the past). The Washington Post recently published a controversial article on Niger’s free market policies in the context of an ongoing famine; the Center for Global Development released an excellent report on making markets for vaccines.

After reading these, I can’t help but think of A to Z, the Tanzanian company manufacturing long-lasting, insecticide-treated mosquito nets. Often, these kinds of nets are purchased by aid agencies and distributed free – tending to poison the market for them down the road.

I'm not saying that food and medical aid are bad, per se. By not sourcing locally, however, the aid community hurts local businesses. But what hurts them more is when consumers expect to receive these items free.

When it comes to vaccines, it’s more about creating research and development incentives. Food aid is an even trickier question. For mosquito nets, however, the technology exists – but consumers won’t buy them after receiving them for free. Who’s right, the aid agencies or the businesses? How do you balance short- and long-term needs? Are aid agencies unwittingly facilitating a cycle of poverty?

For more, you might check out the World Bank's Private Sector Development blog

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Giving vs. Selling

The Business of Development