I do not know whether you are a regular reader of the International Health Policies newsletter produced by some of my colleagues at ITM. What I appreciate most about their global health “intelligence platform” is the weekly overview it provides on our world in movement, its global health component, the aid sector, development writ large, or in a nutshell: the global trends we have to understand and take into account if we really want to generate a better future for billions of people.
The (discreet but attentive) manager behind the scenes of the newsletter is Prof. Wim Van Damme, a colleague whom I have known for a long time and a good friend. One of his greatest achievements at ITM’s Public Health Department (OK, after that, I stop with singing colleagues’ praise) has been to develop and encourage a culture of constant attention to new emerging trends and disruptive changes in global health. Wim will soon work part-time at the University of the Western Cape. I bet the South African university won’t regret its choice. His future colleagues and students will enjoy his eagerness to embrace promising new ideas and take up new global challenges.
The newsletter is in fact the tip of the iceberg of this departmental culture of “keeping abreast of the world”. At meetings, in conversations or through email, colleagues are happy to share their last “good reads” with each other. Documents which stayed for some reason under your radar when they were published emerge again in this way. A few weeks ago for example, a 6-month old report by Homi Kharas and Andrew Rogerson landed in my mailbox. The report is called, “Horizon 2025: creative destruction in the aid industry”, and is just one among the many papers which try to anticipate what development and aid will look like in a few decades from now. Playing Nostradamus in the aid sector, if you want.
Disruptors in the aid industry
If you haven’t read this document yet due to other commitments or if you already feel threatened by its Schumpeterian title, I suggest you nevertheless take some time off to read it. It’s a lovely read.
After laying out their base case scenario on poverty – the locus of global poverty will overwhelmingly be in fragile, low-income African States by 2025, Kharas & Rogerson reckon (1) – the authors identify three major disruptors that will bring about a major transformation in the aid industry. I particularly enjoyed chapter 3 called “First disruptor: social well-being – is private aid dis-intermediating official aid?”. And yes, I agree with the authors: some major changes are about to impact the aid sector. Most of these changes are welcome too: I am among those who believe that aid is necessary but that the standard approach has reached its limits in terms of effectiveness and efficiency.
In my own ‘health system’ niche, I see similar disrupting but not necessarily negative trends. In the North, one can witness the growth of big charity, a decline in small charity and in ODA, new platforms linking private donors and recipients, …. In the South, the emancipation of big Southern NGOs and the growth of public revenue and fiscal space are important trends. Together, these trends will radically transform our sector. A new generation of actors is already emerging, while many actors who were dominant in the last 20-30 years will suffer. One can expect severe damage at the level of a few multilateral agencies, several bilateral aid agencies, some big NGOs, consulting companies supporting the implementation of aid programs, but also for the myriad of small European NGOs whose contribution risks to become very anecdotal in the medium term.
Trends which will transform the health aid sector
Paradoxically, this mayhem among institutional aid actors will happen in a context where private aid will continue to increase. Apparently, Gates and Buffett are starting to have some success in convincing their fellow billionaires (or at least the less callous ones among them) that the right stance is to donate one’s wealth before dying. Even in the South their Giving Pledge has some appeal (2). So, private charity – aka philanthrocracy – will continue to grow (in absolute terms). As many of the traditional aid contributors will suffer, philanthrocapitalists’ relative contribution will also increase further.
So more rich men (and women) are willing to mark history / redistribute their wealth, which is an encouraging trend. As globalization continues, many of these fat cats with a big heart will not be from the North. Billionaires from Mexico and Africa are already funding social sectors and programmes. Big charity is going global. Some of these billionaires will collaborate with existing actors, but many will create new aid vehicles, especially if they don’t particularly trust the 20th century aid agencies for doing a good job. Some of these new vehicles will be innovative, others will feel more old fashioned – some of these donators will no doubt try to reinvent the wheel and repeat old mistakes (e.g. the quest for the magic bullet). But there’s also a good chance that many will bring the type of vision, management skills, willingness to take risks and “gung ho” drive which made them filthy rich in the first place. As a nice spin-off, when they feel they’re on to something, they will encourage their business mates to join them.
Many of us might not like this trend towards more ‘philanthrocapitalism’, as it seems to imply we will still not manage to tax rich people, multinationals & the financial sector properly in a few decades from now. Yet, the trend seems unstoppable, at least for the time being (3). For now though, the fact that many of these self-made men and women can inject a “hands on” entrepreneurial spirit and tend to show a willingness to fail and try again, seems most welcome. This spirit of innovation, risk-taking and integration of technology has been missing for too long in the – somewhat stale – aid sector. The Gates Foundation, a prime example of this new business approach, sends a clear signal of what is to come: in the future, there will be much more room for social entrepreneurs, start-ups and academic spin-offs in global health. The downside is that all these new initiatives will create even more fragmentation and new challenges.
Tough times coming for 20th century aid actors?
Donations by average Northern citizens will also experience a transformation. We don’t have a crystal ball, but the trend for the health sector will probably be downward: in a globalizing world, the convergence of economies will reduce the feeling of citizens in the North that they are responsible for ill health, poverty and inequality in the South (4); economic stagnation and the pressure to cut entitlements in the North for austerity reasons will not help either.
The challenge for the organizations which still get the bulk of their funding from the general public will be to develop a convincing narrative that they really make a difference (cf. recent efforts by Oxfam in their UK and US campaigns, for instance). Humanitarian NGOs (like MSF) and those working in fragile states will continue to be able to make such a convincing case, but others might falter. There will be also new challengers such as crowdfunding platforms directly linking citizens in the North and recipients in the South, like KIVA, Catapult or the (still to come) TrAid+ (5).
Consequently, the World will probably be a lot more difficult for those medium scale NGOs combining public resources (which will not increase anymore and may even decrease in the short term, like in the EU for example) and private donations which tend to be active in the community development business (e.g. digging wells, equipping health centers, building managerial capacity), and which will suffer from yet another trend (which is not covered enough in the ODI document mentioned above): economic growth in the South. First, economic growth will bring its own benefits, by creating a middle-class and satisfying basic needs (access to safe water, electricity…). Second, growth will lead to much more fiscal space in poor countries; countries will – at least in principle – increasingly be able to improve the performance of their schools and health facilities through their own means. Pointing at the failure of the State in the South will become less and less easy – even if we can be confident that in a few countries, we will continue to see vicious cycles, spates of civil war and/or rent seeking corrupt elites and/or dictators. So, yes, fragile states will become the main target for 20th century aid actors (6). Inequality will be a major issue in many countries, as it intends to worsen with economic growth, at least in the short term. Yet, the solution cannot come from aid: it is first of all a societal issue. No doubt, growing citizen demands – see Thomas Friedman on the aspiring virtual middle class for example – will put pressure on leaders to improve governance and eventually address inequality at country level. The Arab Spring was a case in point.
The last trend is of course the strong emergence of non-governmental actors in the South (e.g. BRAC). In the short term, many southern NGOs will probably suffer from the reduced funds coming from Northern NGOs and agencies, but they are plenty enough to make us believe that performing ones will survive and thrive. As they are able to develop new alliances (e.g. with local billionaires), and are often more legitimate (even if nationality is not a guarantee of performance) in the eyes of the public, they will reduce even more the role of Northern aid agencies in the delivery of services to the population.
Opportunities but also new risks?
All these changes will not happen overnight, but there’s a fair chance that in ten years from now, the aid sector will have changed massively. A rapid decline of operational actors which have developed their ‘business model’ in the ecosystem prevailing so far is likely, both in number and impact. Amongst this group, I would include the actors whose funding still relies on Northern tax payers as they might be the slowest to adapt (because of their constituencies, their values, their culture…) On the bright side, a new generation of actors and social entrepreneurs, much more comfortable with the new set of orientations, approaches, values and rhetoric, will emerge. These 21st century aid actors will be keen on innovating, demonstrating impact, ensuring value for money. As hinted above, they will probably be much closer to the entrepreneurial world.
Granted, this transformation of the aid ecosystem involves some risks for the beneficiary population. A big challenge will certainly be to protect the part of the social development program – human rights, empowerment – which is less easy to measure or deliver through contractual arrangements. But nevertheless, I believe the new trends offer a wealth of opportunities for rapid improvement of their welfare. In other words: advantages outweigh disadvantages. The world will never be the same again for the aid community. And that’s probably a good thing.
(1) In case you want to know more about the debate on their base case scenario, see this Economist article.
(2) Their Giving Pledge campaign does not seem very successful in India and China so far, though. Yet, most probably, things there happen below our Western radar.
(3) The Financial Transaction Tax experiment in part of the Eurozone and Cameron’s G8 promise to focus on curbing tax havens are encouraging signs towards a world with less inequality.
(4) They might feel more responsible for issues like global warming, and acknowledge the North’s historical debt in this area.
(5)The latter will have an advantage over brick-and-mortar NGOs, but only if they manage to establish trust and can certify that the money really reaches the targeted beneficiaries. Another challenge for these technological platforms will be to create a “warm glow” effect, similar to what people feel when they attend a fund raising dinner at the school of their kids. Only time will tell whether they can pull this off.
(6) There is high probability that some of these actors will ‘retreat’ to fragile states without questioning the existing limits of their current operational models.