tomsWhen proposing a solution to an economic problem the first question that should be asked is, “Is the solution likely to fix the problem?”

While that may seem too obvious to mention, it’s surprising how many times that question is not given serious consideration. In the past this has been particularly true of poverty-reduction measures. Too often the solutions were judged mainly on motives and emotions rather than effectiveness. If the solution was proposed in a spirit of goodwill and generosity or if it made both the giver and receiver feel good, then why not try it?

Over the past few years, though, there has a been promising shift within poverty-fighting circles. A prime example is TOMS Shoes rethinking of its ‘buy one, give one’ model of helping the needy. The California-based company’s model of giving a pair of shoes to a child in need for ever pair bought by it’s customers has spawned copy-cats in various industries — from baby goods to solar panels. Yet as PRI notes,

[M]any consumers have been asking: Does the “buy one, give one” model actually fight poverty?

The founders at TOMS Shoes have been asking themselves that question, too.

Their do-good model has been the subject of criticism. Among other things, critics wonder if TOMS is displacing local shoe producers, by bringing in their shoes from elsewhere.

[. . .]

Amy Costello, a journalist and host of the Tiny Spark podcast, has been a critic of the TOMS model. Now, she says the firm is starting to listen to its critics.

She points to a recent decision by TOMS to manufacture some of its shoes in Haiti beginning in January, 2014. TOMS plans to employ 100 Haitians and build a “responsible, sustainable” shoe industry in Haiti. TOMS founder Blake Mycoskie pledged that, by the end of 2015, TOMS would produce a minimum of one-third of all its giving shoes in places where the shoes are distributed to needy individuals.

“I give [TOMS] credit. I think it’s a wonderful development,” Costello says. “But I would say that the company still has lots more work to do in this space, to have the impact that it can have.”

Costello argues that giving consumer items to the impoverished is not the solution to poverty.

A more promising approach, explained on the PovertyCure website, is enterprise and wealth creation:

The experience of the last 200 years demonstrates that living standards can be raised even as population density rapidly increases. Innovation and entrepreneurship can and do create new wealth for both the rich and the poor. There are, in other words, enterprise solutions to poverty.

Read more . . .