Humanitarian and International Development NGOs

During our seminar with Duncan Green and Lant Pritchett last Friday, we revisited the question of NGOs providing services that governments are expected to provide – thereby undermining the development of effective states.  This is terrain I initially touched upon in reaction to the Foreign Policy article decrying NGOs as “the new colonialists.”

Lant used a metaphor of NGOs as scaffolding – a temporary structure to relieve an immediate burden of a developing community, as well as a resource to build the wall necessary to hold the burden over the long term.  Problem is, often the wall never gets built, and after a while the scaffolding is dismantled and it’s on to the next project.

I cited examples in my initial post to highlight that this is not always the case.  However, I do agree that NGOs can do a much better job of developing strategies – from the very beginning of a project – to ensure that their intention of transitioning a program or services to local government or authority comes to pass.  There is a need to document and share learning about such efforts, and deepen our understanding about what makes them successes or failures.

Martha Chen of the Hauser Center, who coordinates WIEGO, also offered the example of Bangladesh, where NGOs – BRAC in particular – have essentially created and run an educational system in light of the government’s failure to provide this basic service.  While the intent was to provide education until the government assumed responsibility, there seems to be no end in sight, even after close to 20 years.  She raised the possibility of a hybrid, where the NGO takes over permanent authority and responsibility for what we generally consider a state-provided social service.  Could this work?  What would be the implications?

In Duncan’s thesis, a key element in the relationship between active citizens and effective states is taxation.  As he notes in the book, “until governments depend on their publics for their wages, it will always be an uphill struggle to force them to listen.”

Aid distorts taxation.  When a government receives 60% of its revenue from foreign aid (as, Duncan explained, Uganda did until recently), their leadership is going to spend far more time interacting with donors than their own citizens.  Devising a way to provide aid that insists on creating indigenous capacity so that ultimately aid is unnecessary is a conundrum akin to devising a successful U.S. withdrawal from Iraq, with attendant political dynamics and risk to stability.  Perhaps the first step – as in the much-debated military strategy - is making clear that an exit is going to happen, and sticking to it.

(I originally posted this on Tuesday 11/11/08 and it mysteriously disappeared, so I’m reposting.  Unless there’s been foul play from a new philanthropist acolyte, I can only chalk it up to a site glitch.  Apologies for the redundancy.)

It is a truth almost universally acknowledged, at least by NGO leaders and international development policy experts, that U.S. foreign assistance is badly in need of modernizing and restructuring.   One reason is  excessive fragmentation: aid is distributed by the federal government out of 20 different agencies and 50 different offices.  As critics like to point out, this does not make for policy coherence.

There are myriad factors for this jumble, chief among them the steady disinvestment in USAID over the past two decades.  But there’s another reason that deserves more attention, since it reflects a similar trend among major private foundations and donors: the desire to measure and demonstrate impact.

As three past administrators of USAID point out in a recent article in Foreign Affairs, the focus of many newer presidential initiatives or earmarks is narrowly defined on a particular issue, which is “politically appealing because they appear to have a direct, measurable impact on identifiable individuals.”  Here’s the problem: “… such a concentration on the short-term delivery of goods and services comes at the expense of building sustainable institutions that promote long-term development.”

It’s not enough to make drugs available to treat AIDS in a developing country.  To solve the problem requires a public infrastructure - education and training for clinicians, effective government agencies, appropriate public health education, sustained services - as well as a healthy civil society that will make the drugs less and less necessary by improving the overall health and stability of the affected community.

The current craze in philanthropy for assessing and quantifying impact presents a similar conundrum.   Focusing too closely on individual trees - because it’s easier to count the leaves - makes one run the risk of missing the forest altogether.  As Susan Berresford, former president of the Ford Foundation, remarked over a year ago, “Isn’t it possible that too much reliance on short-term plans can miniaturize ambition for justice and for progress on deeply entrenched problems such as racism, poverty and inequality?”

If the federal government were to develop a comprehensive U.S. development strategy, it could help - at least then the burden can shift to measuring progress on the broad aims of development in toto.  As most community organizers will tell you, rights-based development requires sustained, comprehensive investments in people and communities, and processes for developing local capacity and reforming social structures are messy and non-linear.  A commitment to improving human security - which a new Obama adminstration has put forward as an important element of its  approach to U.S. global engagement - requires a willingness to accept that some crucial elements of progress might be unquantifiable.  The political appeal of short-term results will have to give way to a more complicated, nuanced picture - and that would buck the prevailing winds in the sector.

A continuing theme on which I’ve commented several times (links here, here, and here) concerns the increasing share of private resources in development aid.  Sam Worthington, the president and CEO of InterAction, the leading coalition of 165 U.S. development and relief NGOs, was on campus this week to kick off the NGO Leaders in Humanitarian Aid and Development seminar series and discuss the shifting landscape for NGOs.  The subject of money - and private money in particular - kept coming up.

Sam’s statistics were stark.  In 2000, the revenues of the U.S. NGO community working to reduce global poverty were approximately $4 billion.  About 50% of that funding came from government, 50% from private contributors.  In 2006, revenues had grown to $8.8 billion - but $6 billion came from private resources.  The $800 million increase in government funding was dwarfed by a $4 billion increase in private funds, and the balance was suddenly close to 70% private and 30% public.

On the surface, such a trend might seem liberating to NGOs, offering the space to be more creative and take greater risks in their mission to serve the poorest people in developing countries.  Federal funding is intended to serve the national interest, and it carries constraints.  Early versions of the strategic realignment of U.S. foreign assistance, which brought the Director of Foreign Assistance under the auspices of the State Department, did not even include the word “poverty.” It is challenging for NGOs to stay true to a development mission using U.S. funds when all other interests appear to trump it.

Yet it matters just how that $6 billion in private money is comprised.  Major philanthropists and foundations, the kind that participate in the Global Philanthropy Forum or the Clinton Global Initiative, for example, often impose their own constraints in pursuit of strategic impact.  There have been too many times in the recent quest for innovation that donors have created large projects without taking advantage of the development expertise hard-earned by NGOs through three decades of trial and error.

Whereas before NGOs could voice their views to one entity - the U.S. government - and know that they were  attempting to influence a major segment of their market, suddenly they are faced with educating and negotiating with a multitude of actors, all with their own individual agendas.

As Sam Worthington noted in our discussion, unrestricted money best provides NGOs the freedom to act on their own knowledge and inclinations.  Paradoxically, those NGOs where countless small donors make up the largest slice of revenue are likely to feel freest to pursue their agendas on their own terms - and may result in more innovation and more empowering relationships with local communities than otherwise.  Foundations and philanthropists who believe that NGOs, left to their own devices, are effective at developing successful strategies to reduce poverty would do well to build a percentage of unrestricted funding into every grant.

This is important for a bottom-up approach to development.  Helping local communities and individuals find their own voice and build their own leadership often brings change at the deepest level, but it is not linear, and progress along the way is often hard to measure.  To be successful requires long-term commitments (from 10-20 years) with money that allows strategies to be flexible and priorities to be adaptable.

Some critics* contend that the ties between large Northern NGOs and their host countries have grown too close and diluted the NGOs’ ability to offer approaches that differ significantly from their country’s aid program.  It’s not clear that the increasing share of private funds within foreign aid, while significant, will offer much respite.

* From Can NGOs Make a Difference?  The Challenges of Development Alternatives: “There are serious doubts regarding how far NGOs in the North are able to do anything that is especially alternative to their host countries’ bilateral aid programmes.”

While working through a backlog of reading I came across this post by Lucy Bernholz* on Philanthropy 2173, in which she characterizes “foreign aid” as “international philanthropy” while referencing Reinventing Foreign Aid, a new volume edited by William Easterly.

Private philanthropy is part of “foreign aid,” and as I’ve mentioned in previous posts, arguably its fastest growing segment.  Yet for folks in the NGO field, the term generally connotes funding made available to developing countries by Western governments and multi-lateral institutions like the World Bank and UN (and, from a cursory skim, this is the general sense in which the book uses it).  They have traditionally set the intellectual framework for how and where aid is deployed.

That one of our leading commentators on philanthropy uses the two terms interchangeably might be another example of the growing influence of private dollars within aid.  Yet most of us would not equate government funds and philanthropy and would be careful to draw a distinction between the two when examining domestic nonprofit and public services.  However innocent Lucy’s characterization (the point of her post was something else entirely), it surfaced for me the challenges of perception faced by the international NGO community.

No matter how strong the humanitarian values of the U.S. general public, they misunderstand or are uncertain about our government’s role and aspirations in providing development assistance.  According to data collected by Public Agenda, half of the country believes that we spend more on international aid than Social Security and Medicare.

They also remain pretty skeptical about its value.  As Joe Lockhart (the former White House press secretary) said at InterAction’s 2008 National Forum, “foreign assistance” are two words sure to create strong negative reactions in the American public.  Most view U.S. foreign aid as “charity” — i.e., something based on a moral impulse rather than a strategic imperative — and worry that the money is being wasted.

Major U.S. NGOs are part of a push to modernize and reform U.S. foreign assistance, an issue that they hope will get serious attention from the next presidential administration.  Convincing the public that this should be a priority will be a challenge.  And helping them understand that focusing on the reduction of global poverty as an important goal in and of itself, rather than making it subordinate to our national security or foreign policy strategies - helping them realize that this focus may ultimately have the most benefit for our security will require significant education.

“Foreign aid” may not be the same as “international philanthropy,” but it should aim to be “philanthropic” - strategically invested, with a focus on maximizing its impact on poverty.  Doing so successfully will increase human security worldwide - and increase our national security at home.

Full disclosure: I have taught seminars with Lucy Bernholz and consider her a personal friend, as well as one of the field’s leading thinkers about the future of private philanthropy.

While I have some qualms about the methodology behind the data, it seems clear that private resources for international development are growing rapidly, and are beginning to rival official development aid (ODA).

This could portend a shift in the relationships between NGOs and the governments and key multi-lateral institutions that traditionally set the framework for how development aid works. As I mentioned in the previous post, increased scale means power to influence an agenda.

These private resources are dispersed among different sets of groups. There are private grantmaking foundations, NGOs, church missions, and faith-based organizations. The Gates Foundation alone is responsible for a significant portion of the growth, and the interests of other mega-philanthropists in reducing extreme poverty could quickly add up.

Whether there exists enough of a common perspective and agenda among these groups to put them in the driver’s seat of development remains to be seen. Is there a day coming when governments will see themselves as trying to leverage the money being made available through private sources, rather than the other way around?

Complicating matters is the entry of new players.  While historically ODA has been the domain of the 22 OECD countries, middle-income countries are increasing the amount of development assistance they are making available.

China, for instance, is investing significant sums in Africa.  What does this mean for the western philanthropic dollars and NGOs at work there?  Especially when China’s money has fewer strings attached (theirs is not an anti-corruption or strengthening local governance agenda) and they’re happy to invest in basic public infrastructure that is sorely needed.

Development aid is becoming an increasingly fragmented, competitive marketplace while more money enters the system.  The interests of a wide array of donors and influential actors are jockeying for position.  Harnessing this and using it to improve the impact on people’s lives in developing countries will be a challenge indeed.  NGOs should seek to play a leadership role as these shifts occur, but to be a positive force will require collaboration as well as taking risks that give voice to the aspirations of the people they are serving in the poorest communities around the world.

While both the Homi Kharas/Blum Brookings summary and the Index of Global Philanthropy focus solely on quantity, the Center for Global Development’s Commitment to Development Index (CDI) attempts to incorporate aspects of aid quality.  Since ”aid is about more than money,” the CDI rewards donor selectivity and penalizes tied aid, project proliferation, donor fragmentation, and lack of coordination. 

Trying to integrate measures of quality alongside quantity is - it seems to me - critical, however difficult, and puts the conversation where it needs to be.  It would be interesting to systematically apply similar standards to private funds.  How would NGOs fare?  I often encounter the implicit assumption (and am guilty of it myself) that funds are better deployed by NGOs and private philanthropy than government agencies, but it would be good to use benchmarks to compare. 

Like the Index of Global Philanthropy, CDI also recognizes that “development is about more than aid,” and so it incorporates six other components: trade, investment, migration, environment, security, and technology.  Since its mission is to compare national governments in their commitment to development, it measures the impact of a country’s public policies on these factors. 

This means that the U.S. scores fairly low on the migration component, since its policies admit legal immigrants and refugees at low rates relative to other countries.  I think this more accurately gauges U.S. involvement than the absolute dollar amount of remittances used by the Index of Global Philanthropy.  But it also means that the CDI only estimates the impact of tax policies in the U.S. in stimulating private giving, nowhere accounting for the recent phenomenal growth in private aid described so well by Kharas, Brookings, and the Index of Global Philanthropy that might have significant long-term implications for the aid endeavor.