Japanese tsunami: If you donate money to help the recovery, let the aid groups decide how to spend it.

Commentary about business and finance.
March 14 2011 5:27 PM

Japan Doesn't Need Your Money

Why donations for disaster relief in Japan may not be the best way to help recovery efforts there.

Ofunato, Japan. Click image to expand.
Ofunato, Japan

According to the Japanese Foreign Ministry, 88 countries have offered or sent aid to Japan in the wake of the earthquake and tsunami there. Teams from Australia, China, Britain, and the United States are helping with search and rescue, care for survivors, and damage control. Developing nations like Thailand—which authorized $5 million and a shipment of rice—are helping. Even Bangladesh, one of the poorest countries on Earth, has offered aid. Meanwhile, Japanese and foreign corporations have committed hundreds of millions of dollars, as have individuals, often in $10 increments sent via cell phone.

Concern and generosity are entirely human—and entirely admirable!—responses to the disaster and tragedy in Japan. But if you really want to be helpful, as Felix Salmon and others have noted, there might be better ways to donate your money than just sending it to Japan. There are two basic rules for being useful: First, give to organizations with long track records of helping overseas. Second, leave it up to the experts to decide how to distribute the aid.

The first suggestion is simple: Avoid getting scammed by choosing an internationally known and vetted group. Big, long-standing organizations like Doctors without Borders and the International Committee of the Red Cross are good choices. If choosing a smaller or local group, try checking with aid groups, Guidestar, or the Better Business Bureau before submitting funds.

The second suggestion is more important. Right now, thousands of well-intentioned donors are sending money to Japan to help it rebuild. But some portion of the donated funds will be earmarked, restricted to a certain project or goal, and therefore might not do the Japanese much good in the end. Moreover, given Japan's extraordinary wealth and development, there is a good chance that aid organizations will end up with leftover funds they will have no choice but to spend in country—though the citizens of other nations wracked by other disasters, natural or man-made, might need it more. Aid organizations can do more good when they decide how best to use the money they receive.

When natural disasters hit, aid groups often end up with huge gluts of cash to use during the rescue and rebuilding process. Some (sometimes most) of that cash gets earmarked for specific projects. But in the hectic days and weeks after a tsunami or earthquake strikes, aid groups have no sense of what they might need money for—food or blankets or rebar or doctors. Without flexible funds, money ends up being wasted.

Consider the case of the massive 2004 Asian tsunami. In Sri Lanka, for instance, aid agencies reportedly ended up building "mini-mansions," because they had to use certain donated funds for housing. In Indonesia, humanitarian groups found themselves with more funds than necessary for the construction of orphanages. That excess meant that "families resorted to abandoning their children … because they could not feed and clothe them." Needless to say, in both cases, had donors allowed for a more optimal allocation of dollars, the Sri Lankans and Indonesians might have been better off.

The same problem occurs on a macro level as well: There is a chance that Japan simply won't need all the cash donated to its recovery. Japanese businesses and families tend to be well-insured. The Japanese government is perhaps the best in the world when it comes to disaster management, given the country's frequent temblors and the experience of the Kobe earthquake. And the country has extraordinary financial resources. That means Japan probably does not need billions for rebuilding or humanitarian causes, at least not as much as Pakistan or Haiti or Indonesia did in the wake of their earthquakes. But if donors specify that their money be used in Japan, humanitarian groups will have no choice but to spend it there—even if people in, say, Pakistan or Haiti or Indonesia might need it more.

The American Red Cross gently makes the point on its current donation page. "Your gift to the American Red Cross will support our disaster relief efforts to help those affected by the earthquake in Japan and tsunami throughout the Pacific," it says. "On those rare occasions when donations exceed American Red Cross expenses for a specific disaster, contributions are used to prepare for and serve victims of other disasters."

So feel free to give, and give generously: Many of us do not donate to humanitarian causes except when confronted with them on TV, and could use the reminder to help out. But give without restrictions; leave it up to the experts to figure out how to save the most lives and do the most good. If Japan needs the money, they will make sure the country gets it. But if it gets back on its feet, there are a whole lot of other places that could use the funds.

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