In Defence of Duplication, Waste, and Ineffeciency
Annnnnd, we’re back.
Sorry for the radio silence. I’ve not written anything for 8 weeks. Blogging about the aid industry, aid effectiveness, and the role of the private sector in development is one of my genuine pleasures. But sadly the “doing” frequently gets in the way of the “writing about the doing”.
There was one thing, however, that popped up several times over the last two months that almost coaxed me away from the spreadsheets and the email. This is the issue of competition among NGOs. Frequently aid-effectiveness wonks bemoan the fact that there are too many aid organizations on the ground. Lately, Haiti is a frequently discussed. For example:
“There does seem to be a real problem with too many NGOs, not well-coordinated, and duplicating services, while at the same time many Haitians are still not receiving any aid.”
The argument goes that too many NGOs needlessly duplicate services creating waste and inefficiency and force unneeded competition for limited donor funding.
I want to make it clear for the record that I am a member of the pro-duplication, pro-waste, pro-inefficiency camp. I’ll explain why.
The structure of the non-profit sector is fundamentally flawed. Compare it to governments or the private sector. The private sector provides goods and services to consumers who pay for it with their hard earned cash. If they fail to meet the expectations of the consumers, new companies move in with better and cheaper products.
Similarly, governments (democratic ones) provide services to citizens who pay for it with taxes. If they fail to meet the needs of the citizens they are voted out of power and a new government takes it place with a new plan to better deliver these services.
In each case, there is a direct feedback loop. The beneficiary, be it the consumer or tax payer, directly rewards or punishes the service provider.
But not in the non-profit world. The beneficiary is not paying for the bag of rice, or the mosquito net, or the technical assistance. When an NGO provides a good or service, it is paid for by a donor. If the NGO fails to meet the needs of the beneficiary, they cannot vote them out nor can they cut off the NGO’s funding.
The best-case scenario is that eventually a donor monitoring and evaluation team discovers that the refugee or bureaucrat is unhappy and get rid of the implementing partner. But that happens so rarely that I honestly can’t think of an example right now. Perhaps one of you can.
Which brings me back to NGO overcrowding and duplication. I believe this is absolutely necessary if we really want the non-profit sector to improve, if we really want aid effectiveness to spread.
Competition is healthy, for clients and for donors. In the case of clients, it provides beneficiaries with choice. If there are two water distribution points being set up near each other, people will naturally gravitate to the one that offers the better water, in the safest and quickest fashion. Which will force the other water distribution NGO (and their donors, and the media – good Haiti example here) to ask themselves what’s wrong and make changes. Here’s a case in point.
In the case of the donors, it also provides them with choice. If there are several NGOs doing the same thing in the same area, donors are then forced to compare them based on how well they operate. When NGOs “coordinate” to divide up a country into different operational zones, they are effectively creating a cartel. (Ironically, those countries which donate the most are the least likely to tolerate cartels in their own domestic provide sector.)
To sum up, I am a Darwinist. I believe in survival of the fittest. If we want a fit and fast non-profit sector, we need some competition. We have very little right now.