More Than Altruism: The Politics of Private Foreign Aid

More Than Altruism: The Politics of Private Foreign Aid

by Brian H. Smith

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As government officials and political activists are becoming increasingly aware, international nonprofit agencies have an important political dimension: although not self-serving, these private voluntary organizations (PVOs) and nongovernmental organizations (NGOs) seek social changes of which many of their financial contributors are unaware. As PVOs and NGOs receive


As government officials and political activists are becoming increasingly aware, international nonprofit agencies have an important political dimension: although not self-serving, these private voluntary organizations (PVOs) and nongovernmental organizations (NGOs) seek social changes of which many of their financial contributors are unaware. As PVOs and NGOs receive increasing subsidies from their home governments in the United States, Canada, and Europe, they are moving away from short-term relief commitments in developing countries and toward longer-term goals in health, education, training, and small-scale production. Showing that European and Canadian NGOs focus more on political change as part of new development efforts than do their U.S. counterparts, Brian Smith presents the first major comparative study of the political aspect of PVOs and NGOs. Smith emphasizes the paradoxes in the private-aid system, both in the societies that send aid and in those that receive it. Pointing out that international nonprofit agencies are in some instances openly critical of nation-state interests, he asks how these agencies can function in a foreign-aid network intended as a support for those same interests. He concludes that compromises throughout the private-aid networkand some secrecymake it possible for institutions with different agendas to work together. In the future, however, serious conflicts may develop with donors and nation states.

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Princeton University Press
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More Than Altruism

The Politics of Private Foreign Aid

By Brian H. Smith


Copyright © 1990 Princeton University Press
All rights reserved.
ISBN: 978-0-691-07845-8



Since the 1960s there has been a steady increase in private foreign aid. In 1964 North Atlantic private voluntary organizations (PVOs) or nongovernmental organizations (NGOs) sent overseas approximately $2.8 billion (in 1986 dollars), and by 1980 their annual resource transfers to Asia, the Middle East, Africa, and Latin American totaled $4.7 billion — a 68 percent increase in real value in just sixteen years. By the 1980s there were over forty-six hundred PVOs/NGOs (including church-related missionary and service agencies, secular nonprofit organizations, credit and cooperative associations, foundations, and educational and labor groups) that received donations and grants in North Atlantic countries and transmitted them to counterpart private nonprofit institutions in the Third World. Up to twenty thousand organizations in developing countries now receive this assistance and pass it on in one form or another to the poor.

One reason for this increase of private involvement in foreign aid has been the growing reputation of nonprofit institutions in the United States, Canada, and Europe for being efficient and cost-effective channels of help in disasters. During famines, floods, earthquakes, and refugee crises, PVOs/NGOs are now seen as having the capacity to react more quickly and impartially than government institutions in bringing aid to the victims of such occurrences overseas.

After publicity about the severe famine in Ethiopia began in October 1984, for example, the three hundred U.S. PVOs engaged in assistance to Africa increased their aid to that continent by almost two-thirds by the end of 1986 (from $485.6 million to nearly $800 million). This was largely the result of an outpouring of generosity from U.S. citizens exposed to concentrated media attention on the famine in 1984 and 1985. The PVOs in the United States that are active in overseas work (numbering over five hundred) have an estimated 10 to 20 million constituents in the general public (volunteers, donor members). They maintain regular communications with several million more through the church affiliations that many have. These support groups are readily mobilized during disasters abroad, especially now that such events receive quick and widespread attention in the mass media.

The most important factor, however, in explaining the growing resources available to nonprofit organizations for overseas work has been the dramatic increase in governmental subsidies to PVOs/NGOs. In 1973 governmental members of the Organization for Economic Cooperation and Development (OECD) — which includes the United States, Canada, nineteen Western European nations, Australia, New Zealand, and Japan — gave to PVOs/NGOs based in their respective societies a total of $778.2 million in subsidies over and above the $3.4 billion these nonprofits received from private sources. By 1980 public grants had grown over 90 percent in real value to $1.5 billion. Hence, by 1980, in addition to the $3.2 billion in private resources sent overseas by all North Atlantic nonprofits, $1.5 billion in more aid was channeled through these agencies from home-government sources. This government assistance in 1980 accounted for almost one-third of the organizations' total assets (31.9 percent).

In 1976, the European Economic Community (EEC) began multilateral co-financing of European-based NGOs at the rate of $4.8 million annually, but by 1982 this increased to $22.7 million a year. These subsidies had supported a total of 856 overseas projects through the end of 1981. Between 1975 and 1982 the World Bank (IBRD) involved 650 PVOs/NGOs in one hundred different Bank-financed projects in developing countries, and at the end of 1983 set up a joint committee with PVOs/NGOs to give them greater access to the various policy-making divisions of the Bank. This has led to an ongoing dialogue between the Bank and PVOs/NGOs on mutual development policies, on possibilities of joint education among the general public in North Atlantic countries, and on mechanisms for possible direct Bank funding of PVO/NGO projects.

Multinational corporations (MNCs) have also begun testing ways in which they can cooperate with PVOs/NGOs and their local counterparts in developing countries. Through a process called intermediation, some PVOs/NGOs in recent years have been helping MNCs relate better to local and smaller investment opportunities overseas — especially in agriculture.

There is increasing governmental interest in the international nonprofit sector because there are unique comparative advantages PVOs/NGOs claim to have in reaching precisely those lower-income groups in developing countries that government or corporation aid often does not touch. In 1973 the U.S. Congress mandated a "new directions" approach for U.S. bilateral aid that would focus more directly on the needs of the poorest majority in the Third World. It also urged that U.S. bilateral assistance "be carried out to the maximum extent possible through the private sector, particularly those institutions which already have ties in the developing areas, such as educational institutions, cooperatives, credit unions, and voluntary agencies." The reasons given were that PVOs through their network of private counterparts in developing societies are able to get to the grassroots level better than foreign governmental agencies (who work from the top down through host-government institutions) and were not so tied to official foreign policy objectives of the U.S. government. The feeling of the Congress was that PVOs could reach the rural poor through means not available to the U.S. Agency for International Development (AID) and thus could help fulfill the spirit of the "new directions" mandate.

In the late 1970s the Office of Management and the Budget (OMB) issued a report on U.S. PVOs in foreign aid. It gave as additional reasons for U.S. government subsidies to PVOs that they were very active in fostering small-scale, self-help and self-sustaining initiatives among the Third World poor; were more innovative than government-managed projects; had much lower overhead costs than government aid programs; and represented a "lower level of U.S. Government visibility than direct bilateral assistance." The Congress has continued to be confident about PVOs, and in the early 1980s required that from 12 to 16 percent of AID's annual budget be channeled through PVOs working overseas.

Canadian and European bilateral and multilateral government agencies have voiced similar and additional reasons for expanding their own subsidies to NGOs. The Canadian International Development Agency (CIDA), which began matching grants to Canadian NGOs in 1968, attempts "to tap, for development purposes, the wide range of expertise, experience and services" of the Canadian nonprofit sector; "to offer more flexible and innovative means of development assistance" than is normally possible in official aid programs; to encourage more "Canadians to participate in international development"; and to forge "relationships as equals and partners with people and institutions in developing countries."

The Ministry of Economic Cooperation (BMZ) of the Federal Republic of Germany (FRG), which began cooperating with FRG NGOs in 1962, reasons that NGO programs "are planned and implemented" by partner groups in the Third World, "often benefit the neediest people in the developing countries, and help them cater to their basic needs," and "reach groups which would be barely accessible to the official cooperation agencies." The EEC justifies its increased subsidies to NGOs on the grounds that their host of small projects has a "considerable multiplier effect" in development dynamics from the bottom up. It also believes that NGOs manifest great "efficiency, speed and flexibility" in both planning and execution of projects, and that they are able to "adopt their approach, virtually day-by-day, to changing economic, political and technical circumstances." Thus, they can act "as the exact opposite of bureaucratic, in the pejorative sense of the word."

The MNCs find that environments overseas change rapidly in some countries, and they are looking to other North Atlantic private groups with partners in such societies to explain what is happening. They also find that PVOs/ NGOs in some cases have developed low-cost and efficient methods of educating and training personnel, which, corporations might adopt. The MNCs find that nonprofits sometimes give good advice through their own experience at the local level on how to invest in areas hitherto inaccessible to corporations, especially in the small business sector.

Hence, the importance of PVO/NGO overseas assistance is not reflected in the relatively small amount of resource transfers to developing countries they make in comparison with governmental and profit-making institutions — $4.7 billion in 1980, as compared to $37.8 billion by public agencies, and $13.3 billion by corporations. In fact these other two sectors are looking to nonprofits to improve their own access to and impact on that informal sector of the economy in developing countries most directly involving low-income groups. The PVOs/NGOs are believed to possess those necessary qualities for addressing the needs of low-income sectors that governmental and business organizations normally do not possess — smallness, good contacts at the local level, freedom from political manipulation, a labor- rather than a capital-intensive orientation, innovativeness, and flexibility in administration.

Paradoxes in Private Foreign Aid

The agendas of many North Atlantic nonprofits do not always coincide exactly with those of their private and governmental donors. In some cases, in fact, they appear to be at odds with donor intentions. Many now are defining themselves more as developmental (focused on long-term structural change) rather than relief (committed to immediate alleviation of suffering) institutions. Although their funds from private donors in the United States, Canada, and Europe expand the most during times of overseas disasters (and therefore are given primarily for relief purposes), the official positions of these institutions are now articulated more in terms of attacking the deeper underlying causes of poverty abroad (a developmental objective). A 1985 survey of seventy-seven U.S. PVOs engaged in assistance to Africa (whose income has risen dramatically since the Ethiopian crisis was first publicized) indicated that seventy-five aspire mainly to promote long-term structural change rather than to immediately alleviate suffering. Although the primary motive of many private sponsors still is relief-oriented and most responsive to addressing short-term crises (hunger, sickness, homelessness), the goals of PVO staffs are somewhat different and geared to developmental objectives such as income generation, training, education, public health, and community development.

Moreover, despite the image that nonprofits enjoy for having certain comparative advantages over public institutions as conduits of foreign aid, little systematic evaluation has been done to measure the validity of these claims. These include innovativeness, the capacity to reach the poorest sectors through partnerships with Third World private groups, and the generation of a multiplier effect on development dynamics through sponsorship of replicable grass-roots programs. Information feedback and accountability mechanisms to donors regarding project effectiveness, poverty reduction, and impact on wider socioeconomic processes in Third World societies are largely underdeveloped among PVOs/NGOs.

Judith Tendler's secondary analysis in 1981 of seventy-five evaluations of PVO projects done in the late 1970s led her to conclude that claims by U.S. nonprofits could not be proven with the methods used by PVO evaluators. Frequently these evaluations stressed quantifiable data while overlooking the qualitative issues. They also tended to be insular in their focus since they relied predominantly on evidence supplied by PVO staffs or those directly involved in the leadership of the overseas projects. There was little interviewing of nonleader beneficiaries, community members not participating in or benefiting from projects, other community organizations, or those working for government agencies in the same area. Nor was the experience of learning from development efforts in public sector organizations in the same services taken into account for comparative purposes. Tendler concluded:

Literature and knowledge is by and about PVO organizations, not about the world and the problems in which the project is taking place, or about the general class of problems being dealt with and the experience in dealing with them. Given the kinds of persons not interviewed, and the kinds of literature not cited, it is understandable that PVO evaluations do not give much of a feeling for the areas in which PVOs are innovative, the extent to which the decisionmaking processes they promote are participatory, and the extent to which their projects reach the poor.

She found that the extant evaluations she examined, as uneven in quality as they were, suggested that sometimes PVO projects abroad do not work with the poorest of the poor but with those with some resources and skills who are able to benefit easily from credit or training. The studies also showed that rather than always being innovative, at times PVOs replicate known techniques in service delivery and that they can also be in competition with, or surrogates for, governmental services in Third World countries rather than pioneering catalysts for better public policies. Hence, at times there can be a gap between performance and expectation regarding private foreign aid.

Moreover, many North Atlantic nonprofits are coming to define their development objectives in political rather than economic terms. A growing number believe that the causes of poverty in developing countries include imbalances of power and resources between affluent minorities and poor majorities, between urban and rural sectors, between men and women, or between ethnic groups controlling government and other ethnic groups within these countries. Some also blame what they consider unjust international structures as the cause for Third World poverty, such as unequal trade relations between North Atlantic and developing countries, selective investment policies of MNCs, and arms sales and aid from their own nations to Africa, the Middle East, Asia, and Latin America.

As a result, many North Atlantic nonprofits (predominantly in Canada and Western Europe) claim to fund private groups overseas who are attempting to work for significant redistribution of power in favor of the poor — i.e., who help grassroots groups become more aware of the injustices they suffer at the hands of indigenous political and economic elites or who assist local communities to organize themselves to oppose exploitative economic or political structures. Many Canadian and European NGOs (and a few U.S. PVOs) also carry out aggressive education and lobbying activities in their respective countries. These challenge home-government foreign policies toward developing countries in trade and aid, overseas investment priorities and labor practices of MNCs, and consumption patterns and life styles of citizens in their own societies that the nonprofits consider to be harmful to Third World needs.

Even some nonprofits that do not openly espouse political change as a major part of their overseas objectives (the vast majority of U.S. PVOs) do aim to widen social participation overseas through strengthening the autonomy and effectiveness of grass-roots community organizations managed by the poor themselves. Such strategies at least potentially can have a political impact due to the absence, or narrow scope, of democratic institutions in many Third World countries.

Host governments in developing countries have allowed nonprofit organizations in their own societies (now numbering up to twenty thousand in Asia, the Middle East, Africa, and Latin America) to receive this private aid from abroad for activities that are not part of their own public programs. This has been true in both authoritarian and democratic societies alike. Yet in both types of regimes projects supported by the international nonprofit sector and administered by private groups within the targeted societies have, in fact, not only economic but at times political consequences.


Excerpted from More Than Altruism by Brian H. Smith. Copyright © 1990 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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