Does Philanthropy Cause Poverty?

I recently heard about a country that had severe nutrition issues. The United States told Malawi's government that seed and fertilizer subsidies would hurt the island's economy. To meet the nutritional needs of the residents, the US government began providing surplus food, as did many nonprofit organizations. This went on for many years. The malnutrition and severe poverty continued even with the food donations. A new political leader decided to ignore US advice and instituted the subsidies. His reasoning was that if subsidies were good enough for US farmers, they were good enough for his farmers. As a result, Malawi is now producing enough food for its residents' needs with enough left over for export.

My first thought after hearing about this story is that it sounds like a nonprofit urban legend but my next question was: Does philanthropy increase poverty by creating a disincentive for economic development? Are we unintentionally hurting the communities that we intend to help? What do you think?

Correction: Thanks to Nick for finding the original New York Times article this much repeated and adjusted story came from.