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Nearly 50 percent of the world's wealth is owned by 1 percent of the population. For every dollar earned by a person in the poorest 20%, his or her counterpart in the richest 20% makes almost $80-and the gap is growing. About 1.2 billion people have daily incomes of less than $1 US per day; families of four or more often subsist on a monthly income of $30 US.

Faced with statistics like these (and photos of hungry children with huge eyes), kind-hearted people throughout the developed world have sent billions of dollars worth of money, old clothes, school supplies, bicycles, and other goods to aid organizations over the past fifty years or more. Nevertheless, the problem of chronic poverty is far from solved; in fact, it gets worse year after year. What's going on? And if foreign aid isn't helping, what can we do to actually encourage development in the third world?

Foreign aid falls into two broad categories: humanitarian aid, which provides emergency help in times of crisis such as war, famine, hurricanes, floods, etc., and development aid, which is meant to support long-term improvements in the living standard of the third world's people.

Humanitarian aid can be very effective, when it's administered properly. Traditional development aid, however, doesn't seem to work at all.

To take an example, in the 1980s, several NGOs working in Africa issued appeals to the citizens of the U.S. and other developed countries for old clothes. The "Shirts for Africa" campaign got an overwhelming response; first world citizens could get rid of cast-off clothing and feel good about themselves in the process. It was a win-win situation!

However, the campaign had a devastating impact in Africa, which was suddenly flooded with free hand-me-downs from the States and Europe.

People no longer needed to buy locally-produced clothes, since they could get free things from Shirts for Africa, so textile mills and tailoring shops went out of business. People in the clothing manufacturing sector lost their jobs; in some communities, the local textile mill was the only factory around, so trained workers had nowhere to put their experience to use. Instead of proudly wearing locally-made clothes, people across the continent ended up sporting faded t-shirts with meaningless slogans such as "Puyallup County Fair 1986!" and "Just Do It." This well-meaning aid effort cost the recipients jobs, ruined the economic base of a number of communities, and made formerly self-supporting people dependent on

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