Development NGOs, the State and Neo-Liberalism:

Competition, Partnership or Co-conspiracy

By John C. Cross, Ph.D.

Department of Sociology

The American University in Cairo

(Published in Proceedings of the Fourth Annual AUC Research Conference. Office of Graduate Studies and Research, The American University in Cairo. July 1997)

July, 1997

INTRODUCTION

The role of Non-Governmental Organizations (NGOs) in the development of third-world nations has grown precipitously since the 1970s. Today there are 5,000 international NGOs (INGOs) based in developing nations that work with over 20,000 local NGOs (LNGOs) in developing nations. (Picciotto 1996). According to Shaw (1990), by the late 80s development oriented NGOs in the North raised over $3 billion from private sources and received a further $1.5 billion from Northern governments, which together accounted for 15% of all official foreign aid. In addition, official aid is increasingly funded directly to LNGOs, although figures on this are harder to obtain.

This growth has led to a number of different studies that have generally applauded this phenomena while at the same time raising some warnings about the dangers that an over-rapid growth of the sector may provoke. Much of this literature has focused on two interrelated issues: the relationship between NGOs and the state and the relationship between NGOs and donor agencies that fund them.

With regards to the first issue, the essential question has been has been whether NGOs should be competitors or partners with the state--that is, whether NGOs should maintain their distance from the state so as to retain their autonomy, or whether they should work hand-in-hand with state projects. At the same time, concern has been raised in some countries about the repression of NGOs by the state and the relative merits of politicization of NGOs, particularly if they are to undertake an advocacy role on behalf of the poor.

With regards to the second issue, the emphasis is on concerns about dependency itself, and whether over-reliance on donors--and particularly foreign donors--may affect the way that NGOs operate. The issue goes beyond the simple question of whether NGOs may "sell out" to the donors to consider whether the administrative procedures and requirements of donor funding may in themselves have an adverse effect on the effectiveness of local NGOs in representing the poor, and considers the question of who such NGOs are ultimately accountable to: the poor they service or the donors that fund their service activities.

Usually, this debate takes place within a set of broad terminological stock phrases that imply certain shared assumptions about NGOs and their role in society. Key terms such as "civil society," "participatory development," "efficiency," "self sustainability," "democratization," and "reaching the poorest of the poor" are used continuously as though everyone were in agreement about their merits. While these terms have been occasionally questioned, generally this has taken the form of "how" and "which" questions: Questions about how they can implemented, and which of them are more important. The terms themselves seem to have evolved a life of their own, and some academics and development practitioners have noted a disturbing tendency for such "key terms" to be rapidly incorporated into proposals and annual reports when very little real change in NGO behavior appears to have taken place. (Elliot 1987)

Indeed, there is a growing sense of unease, particularly among leftists in the academic community, about the way that NGOs are funded based upon these assumptions, while in practice the very process of donor funding may be reducing the extent to which NGOs can even meet them. (Edwards and Hulme 1996; Foley 1996; Rigg 1991)

"Terms such as 'self-help' and 'popular participation' have never been defined. It is as if those who have drawn up their plans have merely reached for their glossary of development terms and incorporated them into their documents..." (Rigg 1991;206)

This paper is a first attempt at taking a very different approach, however, to the question of the relationship between NGOs, donors and the state by asking why NGOs have become so popular. In itself, the question is not new. Obviously, the popularity of NGOs has been noted and analyzed in terms of the practical issues that have led to this growth, but few have asked questions about the ideological basis of this growth and, in particular, the way in which this growth has occurred within the context of a curious and paradoxical intermingling of both right-wing and left-wing political agendas that appear to have coalesced around the NGO. It is, I am tentatively arguing, the contradictions between these political agendas which are reflected in the apparent contradictions between the key terminological assumptions used in the NGO sector.

An initial simplistic way of expressing this would be to say that the growth of the NGO sector has been the result of a double hi-jacking in which both left-wing and right-wing ideological streams have focused on NGOs as a solution to problems within their own practical strategies. The leftist hi-jacking was directed at the transformation of conservative charity programs as a way of using "development from below" to combat "dependency" among the poor, with the goal of building up their organizational capacity for resistance and power. This was followed by a right-wing hi-jacking of this leftist development agenda to effectively substitute neo-liberal policy goals such as anti-welfarism, de-centralization (anti-statism), and self-sustainability in such a way that their effect went virtually unnoticed, changing the direction of NGO programming without necessarily changing the personnel involved.

These "hi-jackings" were not, however, specific events necessarily based upon a coherent conspiracy theory, however, but processes taking place over time that were embedded in the individual, organizational and institutional practices of the sector and the political and economic logics that shape them.

The concerns and debates in the literature on NGOs, as well as the documents, proposals, and reports generated by NGOs and donors themselves, reflect these processes and the logics underlying them. To operate and grow, NGOs need funds. Funds must entail plans and proposals that must meet with the goals of donors, NGOs and donors both must account for and justify their expenses to their respective constituencies. The state, for its part, must demonstrate concern for its population, while attempting to safeguard its own prerogatives in a time of changing budget needs and priorities. The list could go on and on, as well as the debate about how these needs affect each other, whether they reflect dependence, control, or symbiosis.

In this paper, I will discuss these issues in terms of the purported benefits and critiques of the NGO sector. This will basically take the form of a literature review, rather than relying on new research. My research plan for the future is to develop an understanding of the evolving interpretation of the NGO community itself that underlies its growth in popularity, while at the same time underlying its limitations and contradictions. This will be an ideological history based largely on a review of secondary sources. As part of this broader research, I am particularly interested in the role of USAID in Egypt that I feel illustrates how the neo-liberal policy agenda has subverted the leftist policy agenda of the NGO community.

NGOs--IDEALS AND REALITIES

The popularity of NGOs has been based on the argument that they provide a number of benefits on economic, political and social levels. Indeed, NGOs sometimes seem to be the modern panacea of development--a cure-all wonder drug that is prescribed for any number of social ills: Poverty, disempowerment, unsustainability, inefficiency, authoritarianism, and the list goes on and on. Like the "patent medicines" of old, sold by traveling doctors from town to town, the miraculous properties of NGOs are sold by heavy doses of anecdotal evidence and "success stories." While it is certainly not the point of this paper to denigrate such successes, nor to argue that NGOs are necessarily detrimental, the over-generalization of such successes by implication to the entire NGO sector is more of a fantasy than a reality.

CIVIL SOCIETY, ADVOCACY, EMPOWERMENT, AND DEMOCRATIZATION

Politically, NGOs are usually associated with the concept of "civil society," and thus it is implied that the growth of the NGO sector represents the strengthening of the ability of civil society to stand up to authoritarian states and demand democracy. Otto (1996) argues that NGOs represent a "third system" between the state and the market and adds, "it is inevitable that the power of the non-governmental sector will at least mitigate the exercise of the economic and formal political power, and it may eventually provide an alternative that entirely transforms the cultural arrangements. This is, of course, what many states fear." (128) While this perception originally arose with respect to human rights organizations and environmental groups (Clark, Ann 1995; Wapner 1995), Otto and others extend it to include developmental organizations. John Clark (1995), for example, argues that development NGOs can contribute to "good governance", particularly at the local level, which "the poor are normally much more concerned with, and affected by...". (594)

Arguing that NGO networking provides an alternative to the "Iron Law of Oligarchy", Fisher (1994) states, "Whether oligarchy is an iron law or... merely a tendency, there are strong countervailing forces arrayed against it among Third World NGOs..." (139). The assumption is that, while NGOs may in some cases be dominated by elite groups, or tied to state interests, on the whole they provide the possibility for an alternative route of popular expression that helps to balance the state, which is assumed to be dominated by elite interests. This may be especially apparent where NGOs seem to have come into direct conflict with the state, such as in Kenya (Ndegwa 1994), Mexico or Indonesia (Cohen 1996; Van den Ham 1993).

Donors with a liberal agenda, or who want to appear liberal, therefore often justify the funneling of resources through NGOs on the assumption that this will "develop" political institutions in civil society. On the other hand, the notion that NGOs represent civil society also plays into the hands of conservatives. As NGOs increasingly take over the welfare role of the state--providing support for the poor and development for the country--this process complements the growing emphasis on privatization and decentralization of state functions. "Civil society" appears capable of taking care of its own needs, according to this argument, providing added impetus to those who argue that the role of the state should be reduced to a minimum.

This perspective reduces the issue of NGO-state relations to the question of relative autonomy of NGOs from the latter, which is where most of the debate in the field lies. Given that NGOs are generally regulated and to some extent supervised by the state, a lot of debate revolves around the question of whether this is good (in terms of preventing corruption in NGOs or improving coordination between the state and NGOs) or bad (in terms of implying state control and limits on NGO activities) or how it may be optimized (Sandberg 1994). Very often, state regulation implies that local NGOs and, even more so, international NGOs often have to remain "apolitical" in order to retain their status. The problem emerges when one considers the possible variations in the term "political activism". Is it just when you support a candidate for public office, or does it extend to situations such as lobbying for new laws or helping to organize the poor to better represent their own interests? When INGOs are involved, the danger is augmented, since the foreign funding of local NGOs may subject the recipient to charges of being a "traitor" to national interests, while opening up the donor to charges of meddling in internal affairs.

"Advocacy" work, often combined with the goal of "empowerment" of the poor, thus creates an "unresolved dilemma for GROs and NGOs in most societies--how to engage in the political process in order to achieve fundamental changes in the distribution of power and resources without becoming embroiled in partisan politics..." (Edwards and Hulme 1996:965) A further problem is given by the nature of funding procedures themselves. Elliot (1987), while arguing for the need to develop more advocacy roles in the NGO sector, notes that "Empowerment is not something that can be delivered or bought. It cannot be reduced to a project... This approach thus offers a very marginal role to the northern agencies." (59)

The question is even more important when government financing of NGO activity is concerned, particularly since much of this financing is provided on a contractual basis in which the NGO is contracted by (typically) a Western government to carry out a specific project. As NGOs become subcontractors to governments, how can they justify being considered a segment of civil society that is able to use its autonomy from the state to provide an alternative arena of popular expression?

LEGITIMACY, ACCOUNTABILITY AND PARTICIPATION

The idea that NGOs represent "civil society" while states represent "elites" is predicated on the argument that NGOs are potentially more "participatory" than the state and market structures, and therefore potentially more "accountable" to the needs of subaltern groups in society. This provides them with greater "legitimacy" in representing the needs of society, or at least of the "masses". John Clark notes, "Many argue that NGOs may be best placed for the task of fostering popular participation which include articulating the needs of the weak, working in remote areas, changing attitudes and practices of local officials, and nurturing the productive capacity of the most vulnerable such as the disabled or the landless." (593)

Not only are NGOs better than the state from this perspective, but by extension, "local" NGOs are better than "international" NGOs. Legitimacy plays alongside claims for "authenticism", popular in the post-modernist "framework". The more "local" an NGO is, the more authentically participatory, accountable and legitimate it must therefore be. While there are occasional warnings about "bogus" NGOs, set up by local elite groups or even set up by governments (GONGOs), Fisher argues that, "By most accounts... GRSOs (Grass Roots Support Organizations) committed to empowerment vastly outnumber corrupt or self-serving organizations..." (133).

The belief that local NGOs are always better than international NGOs are behind the claims of many LNGO activists that INGOs that support them should allow them more independence in their activities. As Kajese (1987) argues, "The burden of responsibility for development in the South lies ultimately with the southern countries and their indigenous NGOs." (79) Kajese goes on to compare the "partnership" between INGOs and LNGOs to that between colonial powers and their native subjects:

"...international and indigenous NGOs remain locked up in a situation not too different from the one prevailing in colonial Africa. The colonialists insisted that the Africans were not ready to rule themselves because they had no education or expertise in modern government. They were right. But they were wrong in refusing the Africans access to better education or to participation in government." (83)

Likewise, while INGOs talk about partnership, Kajese complains that, "...they often seek to do this while exercising complete control over the purse strings and always trying to avoid 'political involvement'," (81) and while paying salaries and training opportunities to local staff far below the level of that provided to INGO staff.

Kajese assumes, however, that LNGOs would naturally be more "accountable" to local people, and pays great emphasis to the particular competency of LNGO staff in local conditions. Both claims may have some merit, but at the same time they should not necessarily be taken at face value.

Foley (1996), for example, points out that the role of outside donor organizations in El Salvador is heavily political in focus. For example, he argues that USAID built right-wing organizations while excluding leftist groups from the development dialogue. Far from being participatory, these groups were typically allied with the business elite in the country, which the US was eager to foster ties with. Other scholars asked, "Is this strengthening civil society or is it merely an attempt to shape civil society in ways that external actors believe is desirable? Will this promote endogenous and sustainable forms of democracy or call forth a backlash of authoritarianism against 'foreign interference'?" (Edwards and Hulme 1996:966)

But even where such overt political policies are not followed in NGO funding, Foley notes that, "Large doubts persist about the capability of NGOs and community organizations to play the new roles, to generate funds on their own, or to assume the representation functions which have often been consigned to them or which they may have arrogated to themselves." (1996:69-70)

A broader question is whether NGOs can be accountable to the poor at all if they are funded by donors. Accountability implies that an accounting is made to those who fund specific activities. In this case, NGOs have to provide evidence to donors that the funding they received was used according to the donor guidelines--a manageable proposition, compared to the unclear prospective of "accounting" to client groups. In for-profit firms, accountability to customers is provided by the market place itself--if customers aren't happy, they simply don't buy the product. But in the NGO sector, those who "buy" (pay for) the product only consume reports, while the services which the NGO provides are ostensibly used by others--the poor. The poor do not have an ability to force an "accounting" on the NGO, nor do they have legal or economic standing to do so, since they do not actually pay for it. The tendency, therefore, is for NGOs to focus their attention on their legal obligations to the donors rather than their moral obligations to their client groups.

As the NGO sector has grown, and funding has increased, a number of authors have pointed to the danger that this may actually decrease the legitimacy and accountability of NGOs to the communities they are supposed to be serving. (Edwards and Hulme 1996)

Furthermore, there is an even deeper question mark here. As Edwards and Hulme point out: "There are a deeper set of concerns about the possible 'rewriting of the social contract' between government and its citizens as a result of NGO substitution for the state in key aspects of the development process... The accountability of a non-elected NGO when providing services to 'clients' is very different to the formal relationships established between governments and citizens." (968) As NGOs replace the state, ostensibly because they are more "accountable", the state itself becomes free to be unaccountable, while the problem is that there is no constitutional system for maintaining NGO accountability. If outside donors start a project to service the poor in 'X' community, for example, how do community members complain about problems in service, and can they legitimately organize to force the donor to maintain, adapt, or expand the program. In a democracy, the community could use their vote to pressure their political representatives, in a less democratic regime, rebel or threaten to rebel. But these strategies work because government officials are at least ideally supposed to represent their interests. What about NGOs however?

Meyer (1992) explains this as the "free rider problem" of NGOs:

"The principal disadvantage of the nonprofit sector relative to the public sector is its inability to deal with the free rider problem. Because consumers enjoy the benefits of others' contributions to the production of public goods, the temptation to free ride is pervasive and public goods will be underprovided in the private nonprofit sector. Governments have the power to tax to enforce contributions to socially desired goods. The nonprofit sector has the further disadvantage of being responsible only to their donors and commercial supporters rather than to the general public." (1117)

In the first world, where many NGOs are funded by national governments, this fact actually allows for accountability to be reinforced on NGOs. Community members can, effectively, pressure the NGO by approaching the government organizations that fund them. In the third world, however, where most of the funding is ultimately international this is rarely an option--or can only be used negatively to block a project.

Rigg (1991) goes even further in one sense in arguing that the pressure on INGOs to come up with more "authentic" local participation often feeds into the hands of local elite groups. In his research in Thailand, he argued that "participation" usually involved working within village patron-client systems and thus, "Village-level development activities which are claimed to be in the 'popular participation' mold, are invariably better characterized as mere 'mass mobilization', while 'self-reliance' has often tended to be seen as, and to become, a form of 'forced labor'." (203)

EFFICIENCY, INNOVATION AND FLEXIBILITY

Another claim supporting the growing faith in NGOs is that they are more efficient, innovative and flexible than the public sector in responding to development needs. In part, this claim is based upon the reasonable premise that NGOs rely on soft funds, and thus must be constantly innovative and flexible in order to attract funding for their programs, in contrast to government officials whose security is based upon either civil service provisions or political maneuvering within a bureaucracy.

John Clark (1995) argues that this flexibility and innovation is a byproduct of their independence from local governments, thus allowing NGOs to provide a series of services that local governments themselves cannot or do not want to provide. At the same time, he also argues that they can provide a "multiplier" effect if they work with the public or market sectors, by stimulating the acceptance of innovative methods of service provision. Meyer (1992) argues that this flexibility also derives from the location of NGOs between the government sector and the market. While the government responds (ideally) to broad based needs, it has trouble responding to the needs of specialized interest groups, which may be therefore underserviced. The market, on the other hand, responds only to specific demands backed up by consumer purchasing power. NGOs can be more flexible in focusing their services, then, on needs and groups that fall between the gaps between the state and market sectors.

Meyer (1995) notes, for example, that NGOs can be set up to cooperate with the public sector and the market sector by performing activities that neither of these sectors can accomplish, and emphasizes this entrepreneurial role in the establishment of two environmental NGOs in Ecuador and Costa Rico that were able to obtain funding from both international aid agencies as well as international corporations. In both cases, the environmental groups were initiated by local officials who felt that they could obtain more outside support and work more efficiently outside the government than within it. In addition, as NGOs, they could perhaps appeal for voluntary support from the public more effectively than could a government program--particularly important where citizens may have a cynical perspective towards the motives of their public officials.

Meyer's examples, however, open themselves up to claims that the NGOs that she analyses may simply be a front for an alliance between the local public and international private sector that has to be hidden away due to political factors. One of her examples, the National Biodiversity Institute of Costa Rico (INBio), is a research-based NGO set up by former officials with substantial funding from international pharmaceutical firms in exchange for a monopoly on any useful products that INBio may extract from the Costa Rican rain forest. Considering that the NGO relies upon volunteer support from farmers and students (support that would not be available to an international for-profit company), this could be easily criticized as a way of using an NGO as a way of reducing research costs for profit-making businesses. Her other example, the Fundación Natura in Ecuador, opens itself up to different charges: as an NGO begun in alliance between officials of the National Parks and Wildlife office of the Ecuadoran government and national and international corporations with heavy support from USAID, it could be accused of being a front for industrial interest groups seeking to undermine criticism of their own activities. Meyer admits, for example, that the Fundación Natura has taken the industry line of a number of environmental debates, and that "they are not in a position to serve as a critical voice," (1286) but she argues that its "legitimacy" is still based on its international reputation. Pointing out that its Executive Director was NGO coordinator during the Rio de Janeiro environmental summit, she argues that this demonstrates that it is accepted as legitimate by other environmental NGOs. On the other hand, it could simply be argued that it is doing an excellent job from a public relations point of view.

This opens up a broader can of worms. NGOs may be more "flexible" because they are easier for international donor agencies and other elite groups to manipulate than local governments. Certainly, Meyer (1992) notes that one advantage that NGOs represent from the vantage point of international donors is that supervision is politically much easier over NGOs than over the public sector: "A donor such as USAID may experience severe political complications in trying to supervise the Dominican government, while nonprofit organizations can be more easily supervised by the donor and by the Dominican government." (1121)

More than just supervision, however, Meyer notes that NGOs are more flexible in the sense that they are much more likely to mold their programs and services to meet the goals of donor agencies. Not only are the staff's wages ultimately dependent upon this, they usually are in a much less powerful position viz-a-viz international donors than are national governments, which can far more easily impose their own objectives on donors since they have an autonomous financial base in the tax structure and, of course, are themselves able to use the legal system to their advantage. While there are, obviously, limits to the power of the state, and financially strapped states may at times find themselves in a position of dependency viz-a-viz international donors (Hill 1992), this is still the predominant tendency.

Meyer adds that NGOs are likely to be popular with donors because they can be cut off at any time--staffing is usually project based, meaning that donor obligations with the NGO end on the completion of any particular project, while governments are usually constrained to hire permanent staff under civil service regulations. To put it more bluntly, NGOs are "discardable". (Edwards and Hulme 1996:963)

While it is often claimed that NGOs can provide services more effectively at a lower cost than the public sector, presumably because of their lower overhead costs, Edwards and Hulme note that, "There is no empirical study that demonstrates a general case that NGO provision is 'cheaper' than public provision." (963) And Meyer (1992) notes that in the United States, where NGOs have a highly developed role in the provision of services under government contract, they have come under criticism precisely because they inflate program costs, as well as creating new bureaucratic problems of accountability. Savings, where they exist, may simply come from the fact that salaries and benefits are lower in the NGO sector.

As NGOs become larger and more dependent on aid from official donors, or other large donors, they also tend to become less innovative and flexible as they become more bureaucratized and have to meet donor standards and stipulations. These changes have increased as donors have pushed recipients to become more 'professional', relying more on full-time staff members and meeting standard accounting guidelines. In Bangladesh, for example Sanyal (1991) found that donors complained that of 700 NGOs operating in the country, only 10 were considered "fundable", largely because they had educated leaders and were familiar with donor procedures. Paradoxically, then, donors felt that there was a lack of competition between NGOs that could lead to innovation.

CONCLUSION

What is clear in this discussion is the lack of agreement in the NGO literature about the ultimate benefits of NGOs. While NGOs are often claimed to cure a host of social problems in theory, the reasons that they are supposed to be able to do so tend to conflict with each other in practice. In theory, NGOs can help develop civil society, advocate on behalf of and increase the organizational capacity of the poor, provide services more efficiently, flexibly and innovatively than the public sector, remain accountable to their client base, and so on. But in practice, the larger NGOs grow the less accountable they are to their clients and the more accountable they are to the donors who allow them to grow. The more dependent they become on outside funding--and particularly official or international aid, the less able are they to take on an advocacy role or a role that might be seen as critical to the national government. The more "professional" they become, the more they depend on outside funding and the less likely they are to be innovative and flexible in dealing with local problems.

"Cost-effective service provision rests on standardized delivery systems and internal structures (often hierarchical) able to manage large amounts of external funding. The qualities required to promote success in democratization are very different: independence from external interests, closeness to poor people, long time horizons for capacity building, and a willingness to confront those in power. It is difficult to combine both roles in the same organization effectively." (Edwards and Hulme 1996: 965)

In the end, it may be the greater power that donors have over NGOs that is far more important than any other of the claimed advantages that NGOs have over the public sector in explaining their recent growth and popularity. I intend to demonstrate this in the future through the analysis of the evolution of the NGO sector, showing that it has become more popular with donors precisely because NGOs have adapted to the goals of donor groups, rather than donors adapting to NGOs. This process is not, I will argue, necessarily a question of opportunism, but one of economic realities from the perspective of NGOs. As they have grown, and become more professionalized, meaning that they require a constant inflow of funds to pay monthly salaries and office expenses, they have had to adapt their projects to meet the criteria of donors who are able to do this.

From the standpoint of donors, on the other hand, NGOs represent a convenient avenue for asserting their influence that is both programmatically and ideologically convenient, and relatively free of the difficulties and potential risks of dealing with governmental agencies. While this in itself may be a positive phenomena, it is also something that requires much more serious study than it has been given in the past.

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