How to transform a duplicative and inefficient UN into something lean, results-oriented, and innovative?
Budget cuts and restructuring – however dramatic – aren’t going to do it. If anything, this will push agencies to be even more risk-averse and chameleon-like, further entrenching what has become a vicious cycle of over-promising and underdelivering.
To get where we need to go, a deeper and more nuanced understanding of how the sector functions is required. Let’s start by dispelling the myths that are masking system deficits and thus obstructing a discussion on how to fix them.
Myth 1: Donors are altruistic philanthropists
A first myth is that when donors allocate funding, their sole intention is “good ends” like poverty reduction or conflict prevention. The evidence – and it’s very robust – is that aid is allocated, principally, to achieve foreign policy objectives, whether these be economic, security, or diplomacy-related.
This is not to say that positive outcomes never occur. It may be that funding is broadly designed to bolster trade cooperation but is composed of products that are undeniably beneficial, like education.
But we should not be confused: Strategic relationships predict aid flows, not humanitarian goals nor development needs. This distinction is critical and not discussing it has consolidated a perception that aid is, or should be, allocated strictly for the good of the beneficiary, which is in turn detracting from how effective it can be.
Myth 2: Government recipients always play by the rules
A second myth is that governments benefitting from aid always use it for these “good ends”. It’s a crude analogy, but using donor money to combat poverty has limited utility. If poverty ends, then the aid flows are likely to dry up.
Recipient governments are also savvy. If donors are giving aid for strategic ends, then they are unlikely to enforce conditions or withdraw money if goals around development/peace are not met. This creates challenges for well-intentioned recipient governments, and opportunities for predatory ones.
Myth 1 + Myth 2 = the principal-agent misallocation problem
So far, the case for foreign aid is not looking good. Yet one critical player has been overlooked: The UN and international NGO entities acting as the agents of donors. In theory, these agents should be able to overcome some of the problems that stem from myth 1 and myth 2. Indeed, the UN’s one country-one vote rule was crafted to ensure that decision-making would not be swayed by individual governments or vested interests. But life is not that kind. Together, these myths create what is known in economics as a principal-agent misallocation problem.
Let’s think of the world as a huge private sector market place. In free market relations, there is a seller (a company), consumers (you and me), and principals (company shareholders). The seller needs to offer consumers a sound product. If they don’t – the product is overpriced, defective, or lacks utility – this is quickly reflected in decreased sales. This sends a signal to the principals, who call for quick action. Sellers react purposefully and efficiently because the principals control their remuneration and job security.
Recipient populations cannot fire an implementing agency, nor can they take their business elsewhere.
The humanitarian-development sector is composed of a similar set of players. Think of donors as the principals. They contract UN agencies and INGOs to “sell” their products (food distribution, education, livelihoods programmes) to consumers (the poor and disaster- or conflict-affected populations). Astute readers will have picked up why the aid sector does not work with the self-regulating efficiency of private markets. There are two flaws, and they are fatally wedded to each other.
First, remember that donors are not actually selling poverty reduction. They are after a different reward, whether this is trade links, military cooperation, or diplomacy. Second, the beneficiary recipients aren’t actually buying it. This makes sense as they can’t pay for it anyway, but it also means they cannot signal back to the principal – or even the seller – if the product they are receiving does not meet their needs. Recipient populations cannot fire an implementing agency, nor can they take their business elsewhere. This puts an ironic spin on calls for reducing duplication: It might be argued that greater competition – which implies more players rather than less – is actually what is needed.
Surely not?
Admittedly, this all sounds quite preposterous. And doesn’t the system have checks and balances for exactly this purpose? It does: complex rules for project approval, monitoring, and evaluation. They just don’t work as robustly as they should.
A key flaw in the UN organisational architecture is that the one country-one vote principle doesn’t reflect how most agencies operate. The modalities set out in articles 17-18 of the UN Charter (known as assessed contributions) only fund the original organs established by the charter. For programming agencies such as UNHCR, UNDP, or WFP, the vast majority of their budgets come from voluntary (individual donor) contributions. This gives donors a great deal of influence over agency operations: They will drive the types of interventions they care about, and discourage the ones they don’t.
The result, at best, is inefficiency (donor money buying “good stuff” is very different from executing a carefully crafted and sequenced engagement strategy). At worst – well, we’re seeing it now. The US is withholding funding from agencies unless they agree to programme in a way that serves its political interests. This is undermining human rights and making the world less safe.
A second problem is that even when monitoring and evaluation processes feed lessons back into programming, they may be weakened by counter-incentives. Every astute manager knows that underspending or reporting unfavourable outcomes is not the way to get your budget replenished or project upscaled. Over time, this has morphed into norms that – implicitly or explicitly – devalue information uptake and learning. Projects have become driven less by evidence and more by “best practices” that are transplanted between projects, while poor impact is explained away as a capacity issue that can only be addressed by bigger budgets and broader programmes.
Again, this is not to say that all programmes fail. One need only look to the advances made in communicable disease prevention, agricultural productivity, and girls’ access to education. But it is important to push back on the assumption that aid – simply because it is aid, or because it is being given by a rich country to a poor country – must be doing good. It is these types of correlations that have prevented the critical interrogation needed for the sector to course-correct.
Where to from here?
Over time, these problems have burgeoned, sparking fiery debates around aid effectiveness. Perhaps a crossroad has now been reached. The message for the sector is that if change is going to happen, it needs to happen now. Business as usual will lead to a consolidation of aid into foreign policy and security goals, making progress towards inclusive peace and human development even harder.
Key to any strategy will be better understanding the system we have and what can be done with it. To be clear, if donor states were serious about impactful programmes, there is a very easy fix. They would allocate funds based on performance, and repair the principal agent problem by enforcing evaluation and fixing the incentive system. But they haven’t, and this is not going to change anytime soon. Instead of ignoring it, pretending it’s not true, or apportioning blame, it’s time to learn to dance with the system.
It’s not that donors do not care about development/humanitarian outcomes; they just care about other things more.
While it may sound counter-intuitive, the idea that humanitarian-development outcomes play second fiddle to donor strategic goals needs to become part of the strategy for realising agency goals. You see, it’s not that donors do not care about development/humanitarian outcomes; they just care about other things more. And this is where the answer lies.
Better identifying the critical junctures that precede effective policy reform; capitalising on situations where the interests of donors and recipients align with development/humanitarian imperatives; and exploiting system dynamics to encourage innovation: These are all things that practitioners within the sector can advance. This kind of thinking needs to start now.
Erica Harper is the author of The Last 10 Per Cent: Why the World Needs a Leaner, More Innovative and Pragmatic Development Sector, Today.
