Haitian international relief, not so to local businesses, lesson for U.S.

An article from yesterday’s WSJ serves to illustrate a point we see so often when government gets benevolent.

In Haiti, relief agencies helping the country recover have also had an effect on some local businesses.  A negative one, that is.

Notes the WSJ:

After the Jan. 12 quake, which killed as many as 300,000 people, the world launched a massive relief effort to bring food, water, medicine and other supplies to needy Haitians. The U.S. alone has spent more than $665 million, official figures show.

But only a tiny fraction of that money is being spent in Haiti buying goods from local businesses. The aid is having the unintended consequence of making life harder for many businesses here because of competition from free goods brought in by relief agencies.

The damage to Haitian companies is making it harder for them to get back on their feet and create the jobs the country needs for a lasting recovery

http://online.wsj.com/article/SB20001424052748704486504575097783544905868.html

No doubt, these are needed services, and many Haitians are better off for them.

Let’s move to a different context, however – the struggling U.S. economy.  As in Haiti, this same kind of tension happens throughout all U.S. industry when government wants to “help.”

Take for example the Stimulus Act and its call to boost broadband across America.  $7 billion has been dedicated to these efforts.  But, did you know that there’re nearly 1,300 telecom companies in the U.S.?  And, virtually all zip codes (and the people who live therein) have access to broadband through them or the local cable franchise?

To get the Stimulus funds, one has to share one’s network. Sounds all well and good.  I mean, how hard can that be?

But, the incumbents who are already there – and who have invested millions of dollars over the past decade to provide broadband services – can’t take advantage of those funds.  That’s because taking Stimulus dollars opens all of their networks, and all of their prior investment, to competitors…essentially on the incumbent’s dime.

Good deal, eh?  Not really – especially when Uncle Sam subsidizes one’s competitors in risky, unregulated markets.

Government gets benevolent and wants to “help,” but in doing so hurts the very companies that will provide sustainable jobs in the future.

It goes beyond the Stimulus.  As government provides more services that would have been provided by the private sector – such as, say, healthcare – it crowds out companies that otherwise could.

What a relief.