Free shoes from TOMS: Can such philanthropy hurt more than help?

An Oscars ad will highlight TOMS, the company whose sustainable-philanthropy program has given away 50 million shoes. But critics say that what 'free' philanthropy sustains is poverty itself.

More than 35 million people tuned in for last year's Oscars show, making the awards ceremony nail-biting not just for actors and crew, but also for advertisers.

After the 88th Academy Awards wrap up on Sunday night, some of those TV watchers may be thinking about a pair of shoes. AT&T will air a 30-second spot featuring customer Blake Mycoskie, the Gen X entrepreneur whose ubiquitous espadrilles and flats have won legions of fans who want to look chic while feeling good about it.

TOMS, which Mr. Mycoskie founded in 2006, pledges to give one free pair of shoes to a poor child for every pair purchased. So far its "One for One" promise has delivered at least 50 million pairs.

For many, Mycoskie has become an icon of "caring capitalists" questioning the logic of 20th-century philanthropy: make your money, then give it away (or don't).

"In the 21st century, we're seeing people actually using business itself as a force for good," Jonathan Storper, a lawyer who focuses on sustainable economies, told the Huffington Post. More entrepreneurs are linking profit and charity from the get-go, and rejecting the image of a distant check-writer in favor of the promise of hands-on help that avoids the pitfalls of traditional aid: sustainability, for one. By bringing in their own income, unlike a nonprofit, business owners say they can make a longer, deeper impact.

For some economists, however, TOMS has become a symbol of all the ways the buy-one-give-one model merely provides a "Band-Aid" to poor communities, rather than providing a lever to help lift them out of poverty. Or worse yet, they say, something as innocuous as a free pair of shoes could push those levers farther out of reach, leaving families dependent on erratic aid that shuts out local industries' chance to develop.

"Fighting poverty is big business. But who profits the most?" is the tagline of Poverty, Inc., an award-winning documentary produced in 2014. Hand-outs like shoes and clothing may be desperately needed in the short-term, the documentary's makers argue, but the long-term winner is the international aid community itself, whose short-term fixes hinder efforts to spark sustainable development.

"Some people get benefits. But overall, the economy doesn't grow," filmmaker Michael Matheson Miller, now a research fellow at the Acton Institute, a faith-based free-market think tank, explained in a November interview with the EconTalk podcast.

He uses the example of a local cobbler impacted by TOMS free shoes: If TOMS were just another rival shoe-maker, perhaps the local shoe-maker would learn to adapt his product, or train for a new trade. But when your rival just shows up sporadically and floods the market with freebies, that's a much harder decision.

Because the product's availability isn't responding to local needs and competitors the same way as a for-profit business would, Mr. Matheson Miller argues, it's not helping to develop sustainable economies there. Nor does TOMS pay taxes in the receiving country.

His proposed solutions: improving poor people's access to property deeds, business licenses, and courts, citing a famous study that found it took 289 days to secure a sewing shop permit in Peru.

Similar critiques of international aid have created some odd pairings, as libertarians and free-market enthusiasts join hands with local activists and critics of neocolonialism. But the take-home message is the same: something about all the charity isn't working long-term. It can be helpful, they say, but it's not "development."

Although aid's overall impact is hotly debated, some studies back up the notion that clothing hand-outs, in particular, hurt local business. A 2008 study by University of Toronto economist Garth Frazer, for example, estimated that used-clothing imports accounted for 40 percent of the drop in African textile production and 50 percent of the industry's employment drop between 1981 and 2000.

But TOMS has been listening.

"If you really are serious about poverty alleviation, our critics said, then you need to create jobs," Mr. Mycoskie told the Huffington Post two years ago. "At first I took that personally, but then I realized that they were right."

Since then, Mycoskie has launched the TOMS Social Entrepreneurship Fund to help support similarly-minded start-ups. And his own business has tried to branch out, with partnerships that take their impact from shoes, to glasses, to medical care. Purchases of a new line of bags help fund maternal health workers' training, for example, and there's a new initiative to produce one third of TOMS shoes in countries where children receive them, such as Argentina, China, and Ethiopia. More than 700 jobs have been created so far, according to the TOMS website, and the company is careful to employ equal numbers of men and women.

The tagline for TOMS' new initiatives: Beyond One for One.