Shoes for Business
The unintended consequences of doing good
A few weeks ago, some of my friends went barefoot for a day. Intrigued, I asked why, and learned that they were participating in “One Day Without Shoes” to raise awareness of the difficulties faced by children who go barefoot every day. This was how I became interested in TOMS Shoes, a for-profit company that sponsors this annual event.
TOMS is well known for its one-for-one business model: For every pair of shoes it sells, the company donates a pair of shoes to a child in need. At first, I thought this sounded like a great way to leverage business to help communities. But a skeptical friend prodded me to think more carefully about the impact TOMS—and other companies with similar business models—are making. By giving free shoes to impoverished populations, she pointed out, TOMS competes with local businesses and takes away customers that might otherwise buy locally made shoes.
Apparently, this isn’t uncommon in philanthropy. Several acknowledged instances can be found where in-kind donations have disrupted local markets in developing countries. A 2008 study found that used-clothing imports to Africa explained 50 percent of the fall in employment in that sector from 1981-2000. After the Haiti earthquake, an influx of foreign food aid—particularly donations of rice—hurt rice farmers’ livelihoods. Oxfam has also found that secondhand clothing imports to nations like Senegal and Ghana have likely hurt local industries and contributed to unemployment. The Oxfam report quotes the General Secretary of the International Textile, Garment and Leather Workers’ Federation on the job losses: “Unable to compete [with secondhand clothing imports], local businesses are collapsing, leaving hundreds of thousands of workers jobless.”
Although TOMS likely has good intentions, its donation strategy may negatively impact the communities it seeks to support. Like the litany of organizations that donate shoes, clothes, and other items to developing countries, TOMS may be undermining the development of local businesses. And while making in-kind donations benefits consumers in the short run, stifling local industry and increasing unemployment in this way will intensify poverty in the long-term.
Another issue with organizations like TOMS is that donating shoes can be financially inefficient. Shoes are typically inexpensive in developing nations—in Mumbai, as in Port-au-Prince, one pair is sold for as little as $2. Shipping a used pair of shoes often costs more; for instance, Soles4Soles solicits donations of $3-$5 to ship a pair of shoes to Haiti. In addition to hurting local business, in-kind donations sometimes simply waste money. We could actually save money and simultaneously help stimulate local economies by just keeping our old shoes and instead buying new ones from community-based vendors.
It is critical that we consider these types of unintended consequences of charitable giving. By pinpointing these problems, we can determine more effective ways of helping communities in need. For instance, TOMS might do better to alter its business model. As one blogger suggests, “Instead of donating a pair of shoes for each pair purchased, take the cash equivalent of that donation (the production cost of the shoe plus the shipping/handling/storage/distribution costs) and instead sink that into local shoe manufacture.” Rather than providing imported handouts, TOMS could partner with local shoe producers to provide low-cost or free shoes to children in need. In doing so, it could support local entrepreneurship and still fulfill its mission of helping children who would otherwise go barefoot.
As consumers of “socially conscious” products, we need to be aware of the impact of our purchases. In a culture where giving back through consumption is increasingly popular, and where myriad companies market items that purportedly help those in need, we should be cautious and deliberate about how we choose to support international development. In some cases, what at first seems like a good business idea could turn out to be detrimental to the communities we hope to help. Even as something as innocuous as buying a pair of shoes could do more harm than good. In the long term, if we want to alleviate poverty and its associated problems—like the lack of shoes for children—individual consumers as well as organizations like TOMS would do better to support directly local businesses for economic growth. It is up to us to invest responsibly in social change.
Niharika S. Jain ’12 is a social studies concentrator in Dunster House. Her column appears on alternate Wednesdays.