In America, we dwell in the comfort of our circumstances. With a current GDP per capita of $46,000, we are considered to be one of the richest nations in the world. A vast majority of the people own cars or have access to public transportation. Almost everyone owns a mobile phone with some sort of Internet connectivity. Even in the poorest neighborhoods, people are able to afford to have a television in the living room. By any measures, we are considered nobles and must adhere to what the French coined as “noblesse oblige”, which simply means the obligations of the nobles.
As a wealthy nation, we have an obligation to help the people in the poorest countries. Most economists had this backwards in the 1980s by helping the poor nation’s Governments and relying on them to support its people. The net results of such initiative led to corrupt government officials, where the vast majority of the wealth stayed within the bureaucrats and none of its funds trickled down to its people. In order to alleviate this problem, the funds need to go from people to people rather than from Governments to Governments.
Today, with the birth of micro-finance, some of this conundrum was solved but still not yet perfect. The problem with micro-finance is that there is an expectation of return on investment. This causes several problems in one of which is that given two mutually exclusive investments; an opportunity cost is associated with going with one investment over another. That is, after the risk/return matrix makes sense giving it a positive internal rate of return after discounting the risk factors, one investment would yield more than the other. Hence, it is wiser to take on the investment with a higher yield. However, the investments underlying micro-finance are high-risk low yielding investments.
This brings us to the best viable option available as charitable donations. Whether it is through a non-profit charitable organization or through a religious organization, giving to charities that support the needs of people living in penury can change the scale of the global economy. We, as a wealthy nation need to be more proactive in this measure and take initiative to support the people living in destitution.