How Tourists Cripple Local Economies

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I recently had a conversation with a fellow traveler who brought up a controversial, disturbing, and sticky theory: that tourists cripple local economies – generally unwittingly, and usually with generous motivations – when they travel.

Without meaning to, tourists can do more harm than good. Here's how to avoid these mistakes. #ResponsibleTravel #Tourism #TheProfessionalHobo

This post was originally published in 2014. It has since been updated for accuracy of links and content. 

“Oh Well, I’m on Vacation”

Regardless of where you travel, if you’re on vacation, you’ll probably say this phrase at some point. It’s usually in reference to spending money on something you wouldn’t normally buy or do, or spending more money than you’re comfortable with on anything from a souvenir to a meal, hotel, or tourist activity.

“Oh well, I’m on vacation – I deserve it.” And indeed, you do deserve it.

But this isn’t about you.

Tourism Sector Inflated Prices

Pisac market in Peru, where negotiation can help - or hurt - the local economy, depending on how you do it

This “oh well, I deserve it” mindset isn’t a secret. People who work in the tourism industry are well aware of it. This is why large profit margins can be built into everything from fridge magnets to day-trips.

In developed countries however, this profit margin can’t be too large, otherwise nobody could afford to travel. But in developing countries, it’s another matter.

Dealing With Currency Disparities

How do you make your money go further and get a rich cultural experience at the same time? Travel to a developing country, where the strength of your currency allows you to stay in nicer places, enjoy more activities, and buy more stuff.

As an added benefit, you’re helping that developing country too right? Yes…and no. Many developing countries rely on tourism heavily; in and of itself this isn’t necessarily a problem. But this is where we enter a grey area.

“Oh Well, I Can Afford It, and I’m Helping Locals Too”

Enter from stage left: giant grey area. As an example, you see an item in a local market in a developing country. In many of these countries, haggling is a part of daily life. Everything is priced according to the expectation that even locals will bargain.

But that item you see in the local market – even at the inflated asking price – is a great deal for you. At home, you’d still pay more for an equivalent item. So you don’t bother bargaining under the premise that you’re getting a good deal, and even if it’s overpriced you’re doing the local vendor a favour, since they can most certainly use the money.

Vendor with a bicycle in Kathmandu Nepal
Making an honest living with a cart of souvenirs in Nepal

But This is How Tourists Cripple Local Economies

What happens when you live in a (developing) world where selling fridge magnets to busloads of tourists yields a disproportionately higher income than highly trained doctors and other invaluable jobs in your society? What’s the incentive to work in any job outside of the tourism sector?

And then, what happens to this increasingly tourism-dependent economy when locals need to visit a doctor but there aren’t enough to go around? Now, locals are underserved by their own infrastructure.

Even worse, under the principles of supply and demand, those doctors might raise their prices, further excluding an entire sector of their own economy and enlarging class disparity between the rich and the poor.

And Then, Hard Times Hit Developed Countries

This is already an unbalanced and grim picture for local economies and infrastructure, and that’s when tourists are coming in droves. So when hard times hit countries where the tourists are coming from, the first thing those populous drop are their vacations. When a developing country that might depend overly on tourism loses their tourists, that crippled economy can collapse.

fruit juice market in Cusco Peru

Does This Mean we Shouldn’t Travel?

I don’t necessarily believe that ceasing to be tourists or avoiding developing countries is the solution. But I do think that a dose of awareness of a local economy and reasonable price points can help. Don’t overpay drastically for something just because you can afford it. Do as the locals do: bargain. You’re not taking food out of people’s mouths in so doing – in fact, you might be putting food in more mouths by helping a local economy maintain some semblance of balance. Don’t tip like you would in North America if the local economy doesn’t adhere to similar practices; in fact, in some countries and industries abroad, tipping can be considered an insult.

And think twice about how you’re spending your money abroad. Is it helping or hurting that country? Is the souvenir ethically and locally made? Is that activity environmentally and socially responsible? Are you enabling somebody, or disabling a whole group of people?

The Solution? Do Your Research

When you travel to a country where the currency, culture, and people are different to your own, go with some knowledge of local practices and expectations. Get over your own hang-ups about haggling and do as the locals do. Although you’ll still probably end up overpaying for something by a local’s standards, you can minimize the negative impact and still contribute to – instead of cripple – a local economy.

negotiating at a street market in Vietnam
Doing my best to haggle in Vietnam, much to local amusement

Responsible Travel Tips

Interested in socially responsible travel and environmentally responsible travel? Check out these articles: 

How to Travel with a Zero Waste Kit

How to be a Responsible Traveller: 5 Unexpected Pitfalls

Check out these alternatives to Bottled Water! 

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43 thoughts on “How Tourists Cripple Local Economies”

  1. This is very interesting, I never thought of it this way. I try to be mindful of not causing harm with my dollar when I travel. I was in northern Thailand where excusions to visit the mountain tribes were offered. Women have traditionally used metal rings to elongate their necks , and I learned that they continue the practice only to attract tourists. I decided I did not want to participate in that.
    That you for your wonderful blog.

    • Hi Andrea,
      You bring up another great point – about manufactured tourist experiences. The longneck tribes are a perfect example and a disturbing one at that, given the adverse health effects of adhering to a practice that isn’t even observed locally any more.

    • Megan – True. I was chatting with a friend of mine (who is not a long-term traveler), and she didn’t even realize that tipping could possibly be considered an insult abroad. It gave her new food for thought as to the necessity to be aware of cultural practices before going abroad, even for vacation.

  2. Really great post. I normally don’t overspend ‘just because I can’ – as I normally can’t because I stretch my budget to the limit to travel as long as possible, but I had never really thought about it this way. Thank you for the informative post. 🙂

    • Hey Zoe,
      Indeed – for budget travelers, overpaying isn’t usually as much of an issue, but even I can say I’ve blundered in the past with how I’ve spent money. Glad you enjoyed the post!

  3. Nora, you certainly gave me something to think about. I rarely try to get a vendors “bottom” price as I had thought the money might be going to help put food on someone’s table or make a small difference. I did see an example of workers migrating into the tourism business recently when we visited Cuba. Doctors were driving taxi cabs because they could make a better living doing that instead of seeing patients. Thank you for a well written article that brings this issue to light.

    • Thanks, Joanne!
      Cuba is a particularly good example of this, given that the political economical structure dictates a relatively even income for everybody across the board, except for those people with access to tourist dollars. That extra cash goes underground most of the time and feeds a whole different sector of Cuba’s economy. It works (to a point)….and yet, as you saw, it also doesn’t.

  4. This is a very interesting post that talks about the other side of the issue- how overpaying tourists can disturb the balance of local economies. In countries like Vietnam, I saw tourists paying too much for cheap souvenirs and justifying this saying that they were trying to help locals. While working with some local students from the ethnic minorities whose parents sold to tourists on the streets, I realized that their motivation to get a real education was low and the only businesses and jobs they aspired to and knew were all heavily dependent on tourists.

    • Hi Natasha,
      While I’m saddened by the harsh truth of your experience in Vietnam with young locals who aspired only towards working in tourism, I’m also glad you shared this experience here – it’s not just me postulating on this theory! 😉

    • Thanks, Robson! Glad you liked the post. When I had this chat with a friend it gave me a whole different perspective on it as well.

  5. A situation that every tourist might face when they travel. Frustrating situations. Clearly explained with solutions.. Very interesting post this is.. Enjoyed reading it very much.

  6. So true Nora – I was in Cartagena when I saw a huge cruise ship come in. It was a feeding frenzy when tourists came off that ship, the port suddenly came alive and suddenly just the cost of a bottle of pop doubled. Couple of hours later the ship left and all went back to normal. That’s just a microcosm of the larger effect of tourism on developing economies.
    Frank (bbqboy)

    • Thanks for your input, Frank. Interesting that the prices inflated even more when the cruise ship came in, and that non-cruise-ship tourists got a better deal when there wasn’t a ship in port. I guess cruise ship passengers are seen as the golden goose!

  7. Very interesting article, Nora. I never really thought about the ripple effect you mention here. I always assume I overpay, but I do try to haggle where appropriate. From a purely selfish point of view, if the local price is $5, I want to pay $5, not $10 just because I’m a tourist or because I can afford it. But you’re right, it makes sense to try not to pay soooo much just because it’s vacation. As for tipping, living in Germany has definitely helped me with that one. Not many countries outside of North America tip. In Germany, it’s perfectly acceptable to get a bill for 18 euros for dinner and leave 18 euros. It’s also fine to round up and leave 20, but no one expects it or gets insulted if you don’t tip. (Unless you’re at a restaurant that caters to tourists, in which case we’ve noticed they have started expecting tips and get mad when we don’t.) It is tough in developing countries because the urge is to leave a little extra to help out because a couple extra dollars goes a long way, but if it does more harm than good in the long run, it’s not worth overpaying and overtipping just because we can afford it.

    • Ali,
      Interesting that you say in touristy restaurants they expect tips….cheeky! And another negative ripple effect of tourism, even on a developed country.

  8. Very interesting piece, I wrote something to the same tune a few months ago (you can click on my name if you want to read it) and my conclusion is that developing countries should regulate the income of the people involved in the tourism industry because otherwise you end up with potential medical doctors ditching schools and going for the easy money route of being tour guides and waiters.

    Sure, in the short term the money influx is more than good but long term? Long term you end up with a country that ONLY lives by tourism and has no professional qualified medical doctors, lawyers, engineers and such.

    • Hi Raphael,
      Wow – great article, and curious that we both arrived at similar conclusions! Great minds think alike. 🙂

  9. The worst are the big cruise ship companies: they keep their passengers on a tight lead with short stops at each port, then rent or buy the majority of shops close to their docking pier, stock these shops with overpriced and often “kitschy” souvenirs, majority of which are “Made in China” or elsewhere, run these shops with cheap labourers (who oftentimes aren’t locals, but Filipinos etc., who are full-time employed by the cruise ship company), and come end of the cruising season they close the shops for 6 months, pack up some of the goods and ship them to their destinations of the next season.
    Result: hardly any of the money cruise passengers spend goes into the local economy!

  10. Great article with views I have batted back and forth in my own mind. Do I pay more because I can or go native?

    One thing that you did not mention in this article, but circumvented in another was ‘no room in the backpack’ to buy anything else. I have been wondering and wanting to do some research on the impact of airline luggage rules and its role in the tourism economy. I know here in Europe (I live in Hungary), the budget airlines have gotten abrasive with their limitations and charges. When we fly now, we really put back many of the things we would have bought for fear of being over the limit in size or weight, causing a hefty ‘fine’. When I tell over-enthused shop keepers, “sorry, but the luggage will not allow it’, they seem to have that downtrodden look like they have heard this before in multiple languages.

    Even when we went to the US this last April, I had to purchase a new suitcase since my 12 year old piece was no longer within the size limits. Then I was paranoid about the weight of the luggage after attending my own wedding and having to haul things back. Made by 1 pound.

    • Hi Ryan,
      Great point about luggage. Indeed it’s easier not to buy stuff if it doesn’t fit into your luggage, yet I’ve still had my share of tense “will my luggage make the cut” moments while standing in line at the airport. I’m about to make a few Ryan Air flights in Europe, and I’m not too sure if they’re going to like what I bring along as carry-on. Fingers crossed!

  11. Hello Nora,
    Thanks for the post “How Tourists Cripple Local Economies”
    I did send the following article to Raphael Zoren, and his related post. The first paragraph is a Canadian example and was not included.
    You asked: what happens to this increasingly tourism dependent economy when locals need to visit a doctor but here aren’t enough to go around?
    Not enough doctors to go around does not only happen in a tourism dependent economy. Why the assumption is that people who don’t go into the tourism industry in the third world would want to be a doctor is a little lost on me. All things being equal, people will navigate to jobs that give them satisfaction and provide a living wage. The incentive to work in jobs that do not have a high income is job satisfaction and having a passion for the job. That is why many of us are in the travel industry.
    Personally speaking, I can say that locals in rural areas of Ontario, (one hour outside of Toronto), are underserved by their own infrastructure. This is also a major problem in Northern Canada. I have lived in in areas where the local doctor retired and only a nurse practioner was left to provide initial service to three towns. The towns are always trying to recruit new family doctors, but with little success. Whether it is the doctors’ debt load or the unfashionable aspect of small town life is unknown. The locals would use the emergency unit of the hospital that services at least 6 towns as a walk-in clinic. Sometimes we notice things abroad what we do not notice at home.
    In third world countries, there are usually community clinics set up as first response to the community’s medical needs. Grass roots groups have been adaptive and innovative in meeting their local needs in many tourism-dependent economies.
    This is the rest comment to Raphael Zoren:
    Thanks for the great thought provoking post. As a seasoned traveller I realized long ago that one must do as the locals do, and bargain in countries where it is appropriate. The first thing I would learn in the local language is: “I need a better price,” while giving them a knowing look. This usually worked and everyone was happy.
    I do have an issue with the idea that people earning more in certain fields’ ruins the local economy. You mention waiting staff as an example. What if they earned as much as Doctors in the US?
    First of all the medical profession is highest paid field in North America.
    People have lost their homes and sleep in cars in the US because they do not afford to pay the medical bills, or pay for the treatment that these college educated Doctors prescribe. I don’t how the new Medicare proposals will affect this.
    Doctors in the US leave college with an incredible debt load that usually directs their choices of specialities that sometimes do not include humanitarian motives.
    Having more Doctors in a country does not necessary mean people will have more access. If a waitress or street vendor cannot pay for treatment. It will not matter how many Doctors there are in the country.
    Like any country where public education is free at the secondary level, not everyone aspires to be a Doctor, lawyer, or engineer in third world countries, where secondary education is fee paying. And these are not the only professions that will get people out of poverty. Many blogs are written by people who have in fact stepped out of these professions in North America and Europe, to work the travel industry.
    The factory worker in the US car industry is paid a very high wage for someone who is usually not college educated. The wage reflects the hard, tedious work that requires certain standards to maintain the safety of the finished product.
    Being in the service industry in most countries is usually a means to an end not the destination. I do believe that education is key to moving away from poverty. That waiter or waitress, in third world countries should get as much as possible because they are usually supporting many members of their family. I disagree that it is an easy way out of poverty. It is very hard to be in the service industry, especially when you are doing it to pay your college expenses, or those of your siblings. I can personally attest to this. Usually, families are much larger in third world countries and the familial expectations are high. The person working will be expected to help grandparents, parents, brothers and sisters who may living in rural areas. Schools are not free in most of these countries, so the waitress/waiter will be helping to support a sibling who aspires to be a Doctor, or engineer etc. Children tend to leave school because their parents cannot afford school fees.
    Nigeria, for example has a high number of skilled college educated workers who cannot find jobs and their hospitals are not empty.
    In East Africa, which I am familiar with because I have an African arts and crafts business. Many of the co-operatives I deal with sell their crafts to tourists. Cooperatives are run as a business and many aspire to be in this business because it is viable and allows for a relative amount of control over their finances.
    Parents in East Africa value education, and know with an education their children will have a chance to be better off than they are. School fees are a priority here. The problem in East Africa and other African countries in general, is that there are not enough public sector jobs and many post- secondary graduates do become street vendors in the hope of becoming full-fledged business people. This is self-employment and should be seen as the entrepreneurial reality that lifts people out of poverty.
    It must be remembered that many third countries have a system where many palms have to be greased to get even basic services, from public officials, to vendors getting their products. It is not ideal, or ethical, but it is the reality and what the population has to work with. To be fair, there are Ministries in charge of rooting out this corruption, but who watches the watcher.
    In conclusion, while I whole heartedly agree that tourists should not give money excessively in third world countries because they feel sorry for the people in tourism earning an honest living. And I do agree with people doing their homework before travelling. I do believe that people should be rewarded for a job well done as in any country in the world. If you get exceptional service, it is okay to show your appreciation.
    I do not agree that professions that are overpaid in North America translate well or solve the problems of shortages in third world countries.

    • Hi Judith,
      Wow – thanks for your input! I was just using the scenario of a doctor as an example of an overall economic picture, but you provide some great points about doctors, career choices, and economic priorities around the world. Thank you!

  12. One of your best posts to date Nora! Thanks for the brain fodder. After 7 years of continuous travel I have become adept at haggling. It used to make me cringe, but now I see it as a form of social play with the vendor. I try to pay local prices or close to it for most things. I generally don’t buy souvenirs any more and if I do, I try to get them direct from the people who make them so the money goes to the artists and keeps the trade alive. I don’t mind paying tourist entrance fees for things like atractions if that helps to keep the price of entry within reach for the local population. also tourist fares on some things lke boat services subsidises the locals essential transport needs. I’m fine with that. If I think I am being cheated, taken advantgfe of or seriously overcharged I just walk away. There is very little I need badly enough to buy into that behaviour of unscrupulous salesmen or taxi drivers. If I want to ‘help’ a country I do my best to find a well run and honest NGO or project who can help distribute my relative wealth to those who need help the most.

    • Hi Stephanie,
      Great points! And you’re right – I don’t mind either if tourists pay one price and locals another, as is done with many local transportation services – as long as it’s regulated. And I like your way to help as well. Happy travels!

  13. I agree! I have also experienced the downsides of this in the education sector — language / art / dance / music teachers neglecting classes with local students to give private classes to overpaying tourists (for whom the whole experience was a novelty, unlike the local students for whom it was an important part of their education).

  14. I just stumbled on this article, as a person of Caribbean descent I have some experience with the paradox of the tourist industry, and find some of the assumptions and supposed realities somewhat offensive. I must say I think your article ignores several issues; you suggest that in developed countries we do not over pay for items that we consume but the fat is that when you consider the mark ups on items produced in third world countries by slave labour at a wal mart or the sear or any big international stores, combined with the true cost of food we consume being off set by subsidies, and unsustainable farming we seriously over pay for manufactured goods and under pay for food creating the international realities you discuss. I personally bargain in North American stores much more than in developing countries. some tourists tipping are not transforming developing economies, demanding companies pay fair amounts to workers however, might. I also think there is a problematic element of “guilt” in the post implying that the tourist dollar can make or break nations. You cannot know the ambitions and dreams of people and you should not feel that they depend on you to create them. Developed countries have the same issues with stats proving that children of parents that did not attend university are less likely to do so, why not address the same issues in your backyard?

    • Hi khia,
      Great observations. However the issues you are pointing out (which are very good issues!) are more about globalization and mass production, which indeed to have something to do with developing economies and societies (in that western countries are taking advantage of economic disparities to underpay workers abroad), but very little to do with tourism – which is the specific focus of this piece.
      Everything is of course related to some degree; and I also applaud you for bargaining in North America – of course, why not! But that’s not what I’m talking about here.
      This world has a lot of problems. I only tackled one in this post.

  15. Nora, you have only scratched the surface. You need to go deeper and write about how tourism cripples local economies. The tourists are only a symptom of the underlying psychopathy.

    The plus in tourism for me is that it opened my eyes to the failings in humanity and turned me into a more responsible human being. Here’s a starter page, and if you have the time read the whole issue and the web site and you will see where I am coming from.

    Regards, Warren

    • Hi Warren,
      I agree that it runs much deeper than the scope of this article. Glad you’ve turned this icky topic around into a positive thing for your personal development. Cheers!

  16. “…reference to spending money on something you wouldn’t normally buy or do, or…” pissing in a street corner, dump garbage on the floor (something they’d not even dare in their own places), stopping (in groups) on the sidewalks “mouth-openly” looking up and around taking photos of anything that moves – or/and mostly doesn’t – while carelessly disturbing the normal circulation of the local inhabitants – in a real case resulting in a broken ankle in someone who was forced to get out of the sidewalk to pass by a bunch of idiots who didn’t even reacted (didn’t care) to the “excuse me” request for passage and… took a mere curious look at the fallen person without even trying any help gesture!!!
    The money they spend doesn’t pay the disturbances they leave behind.

    • Hi Miguel,
      I’m sorry you have had bad experiences with tourists in your home town. I believe there is a fine line between a place (and its people) inviting and accepting tourists (and the money they bring into the local economy), and being overrun with tourists to the point where the local infrastructure (and people) are overloaded.

  17. If you did what is suggested in some developing countries, like South Africa, it would be heartless. There is so much competition for selling souvenirs in the informal tourist economy that you would probably already be getting an amazing deal before haggling. In restaurants, waiters and waitresses get little to no basic wage. They depend on tips. So if you tip like a cheapskate then you only contributed to the owners pocket while the staff will get nothing. I don’t agree with this article. Perhaps it applies to completely disfunctional economies.


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