Foreign aid has a downside, however, which this article in the Miami Herald reveals. Because of the influx of free medical care in the aftermath of the earthquake, Haitian hospitals are losing money and forced to lay-off staff to stay afloat. Their potential customers are receiving care from free, charitable clinics and the hospitals are losing the revenue they need to pay their bills and stay afloat.
This reminded me of the mosquito-net example given by Dambisa Moyo, the author of Dead Aid, in a Wall Street Journal article from March 2009:
Even what may appear as a benign intervention on the surface can have damning consequences. Say there is a mosquito-net maker in small-town Africa. Say he employs 10 people who together manufacture 500 nets a week. Typically, these 10 employees support upward of 15 relatives each. A Western government-inspired program generously supplies the affected region with 100,000 free mosquito nets. This promptly puts the mosquito net manufacturer out of business, and now his 10 employees can no longer support their 150 dependents. In a couple of years, most of the donated nets will be torn and useless, but now there is no mosquito net maker to go to. They'll have to get more aid.The issue of Aid with a capital-A (Ms. Moyo is largely discussing foreign government aid on the macro level rather than the micro level) is far more complex that one first imagines.
Compassion for individuals compels us to do something, and yet our impulses often end up worsening the situation for those individuals in the long term.
It is a vexing problem without a neat and tidy solution but my take-away principle is this: Whenever possible use local supply-lines to provide aid to people in developing nations. In other words, provide the nets, but buy them there.