[WSIS CS-Plenary] FW: <incom> McGann and Johnstone,The Power Shift and the NGO Credibility Crisis

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Subject: <incom> McGann and Johnstone,The Power Shift and the NGO
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The Power Shift and the NGO Credibility Crisis
By James McGann and Mary Johnstone
Brown Journal of World Affairs 11.2 (Winter/Spring 2005)

World politics has undergone a radical and often-overlooked
transformation in the last fifteen years, resulting neither from the
collapse of the Soviet Union nor the rising tide of fundamentalism, but
from the unprecedented growth of non-governmental organizations around
the globe. NGOs or Civil Society Organizations (CSOs) have moved from
backstage to center stage in world politics, and are exerting their
power and influence in every aspect of international relations and
policymaking. NGOs have been a positive force in domestic and
international affairs, working to alleviate poverty, protect human
rights, preserve the environment, and provide relief worldwide. Few,
therefore, have felt the need to take a critical look at the
effectiveness and accountability of these organizations.

After 9/11, however, the specter of terrorists using NGOs as a front for
their operations and some highly publicized cases of abuse have made
this a critical issue that needs to be addressed by the NGO community.2
In addition, the increasing power of NGOs has prompted scholars,
governments, and the media to raise questions about the roles and
responsibilities of these new global, non-state actors. Fundamental
questions include: how many NGOs actually exist, and what are their
agendas? Who runs these groups? Who funds them? And, perhaps most
significantly, to whom are NGOs accountable, and how and what influence
do they actually have on world politics? This article will attempt to
address these questions and suggest some ways in which NGOs can become
more transparent and accountable as a means of protecting the
credibility and independence of these vital organizations.

New Actors and Agendas

Organizations such as Amnesty International, Greenpeace, and the
International Campaign to Ban Landmines have helped bring
non-governmental organizations the international recognition that has
made "NGO" a household word. Some NGOs gained notoriety by organizing
large-scale protests that captured international headlines due to the
violence and disruption they caused. Still others have organized
meetings to coincide with the official gatherings of the G-8, the World
Trade Organization, the World Bank, and the International Monetary Fund
with the intent of challenging their legitimacy.

Milestones in this largely non-violent NGO revolution include the
Solidarity Movement's role in the 1980's political transformation in
Poland; the influence of environmental activists on the outcome of the
1992 Earth Summit in Rio de Janeiro; the international coalition of
groups led by the South Council that developed the 1994 "Fifty Years is
Enough" campaign directed at the World Bank and International Monetary
Fund; and the labor, anti-globalization, and environmental groups that
derailed the 1999 Seattle WTO meeting. The effectiveness of these
efforts stunned the major multilateral institutions and governments
worldwide and forced them to develop ways to engage and involve NGOs in
their deliberations and decision making. With their place in world
politics now firmly established, the majority of NGOs have moved from
protesting on the streets to contributing to policymaking in the
boardrooms of the United Nations, World Bank, World Trade Organization,
and the International Monetary Fund.

International relations were once the exclusive domain of diplomats,
bureaucrats, and states; however, today's policy-makers must consider a
diverse set of international actors when formulating policy, including
organizations as varied as CNN, al-Jazeera, the International Campaign
to Ban Landmines, al-Qaeda, the Association of Southeast Asian Nations
(ASEAN), and the Organization of Petroleum Exporting Countries (OPEC).
While these actors were not born of globalization, they have been
empowered by it. The diffusion of information, technologies, and power
have leveled the playing field and enabled NGOs large and small to
organize locally and have a global impact.

Jessica Mathews, Lester Salamon, and others have written extensively
about the dramatic proliferation of NGOs and the impact these
institutions are having on world politics.3 The current body of
literature, however, has not examined the problems created by what can
be called a crisis of transparency and accountability, an issue that
looms on the horizon for the entire NGO sector. As we will see, NGOs as
an international community lack the transparency and accountability in
terms of finances, agenda, and governance necessary to effectively
perform their crucial role in democratic civil society.

NGO Proliferation and Power

The term "non-governmental organization" describes a wide variety of
organizations variously known as "private voluntary organizations,"
"civil society organizations," and "nonprofit organizations." The
dramatic proliferation in the number of NGOs and the growth in public
and private grants and contracts flowing to these organizations have
enabled them to become a powerful force in world politics. Because so
many types of organizations are subsumed under the acronym NGO, the
scope and breadth of this sector's typological landscape is lost. Our
inability to accurately gauge the size and range of this sector is one
of the critical problems that needs to be addressed jointly by the
public (first sector), private (second sector), and NGOs (third sector)
around the world. Despite these limitations, a variety of efforts at
estimation provide a glimpse into the scope of NGO proliferation. The
Economist estimates that the number of international non-governmental
organizations rose from 6,000 in 1990 to 26,000 in 1996.4 According to
the 2002 UNDP Human Development Report, nearly one-fifth of the world's
thirty-seven thousand INGOs (international non-governmental
organizations) were formed in the 1990s. The Independent Sector, a
non-profit organization that serves and tracks developments in the third
sector of society, estimates that there are currently 1.5 million
non-profit organizations in the United States. Similarly, India was
estimated to house more than one million NGOs. NGOs have not only
increased in numbers but also in membership, with many organizations
more than doubling their member base at a steady rate.5 Recent figures
from the United States Institute of Peace (USIP) emphasize the growth of
NGO budgets, many of which have reached millions of U.S. dollars. USIP
states that the 160 INGOs associated with InterAction have a combined
annual revenue of $2.3 billion, almost all of which comes from private
donors. USIP also echoes the point that "sheer growth in the number of
INGOs in recent years has been dramatic," noting that more than 1,500
INGOs are registered observers of the United Nations.6

The real story is not the proliferation of NGOs, but how these
organizations have effectively networked and mobilized their members to
reshape world politics. This point was graphically illustrated by the
significant NGO presence at the 1992 Earth Summit in Rio, where 17,000
NGO representatives staged an alternative forum to the UN-sponsored
meeting, while 1,400 were involved in the official proceedings.
Emboldened by their success, an even larger group converged in Beijing
for the Fourth World Conference on Women in September 1995. There, an
astonishing 35,000 NGOs organized an alternative forum and 2,600 NGOs
participated in the official multilateral negotiations.

Understanding the Paradigm and Power Shift

The growth of non-state actors has in large part been fuelled by the
perceived inability of both domestic and international institutions to
respond to the social, economic, and political consequences of rapid
advances in science and technology, growing economic interdependence,
and political fragmentation. In addition, a growing number of
transnational threats (pandemics, global warming, and the proliferation
of WMDs) that require a coordinated response have created a need for new
partners and approaches to solving global issues. As the NGO sector
grows, however, it is also facing a new array of organizational
challenges that it must address. We have identified six interrelated
forces that we believe have propelled the remarkable growth of NGOs, and
here look at both the problems and possibilities that each of these
represents:

1. increased democratization, and recognition of the importance of civil
society in promoting democracy;

2. an increased demand for independent information and analysis;

3. the growth of non-state and inter-state actors;

4. improved communications technologies;

5. the globalization of NGO funding, especially from North to South; and

6. what can be called "a crisis in confidence."

1. Democratization and the Civil Society Ideal:

The addition of more open societies has been a necessary condition for
the creation of an environment conducive to the proliferation of
independent, issue-driven, and action-oriented NGOs. The emergence of
the civil society movement has put political pressure on governments,
which in turn have created the space and demand for NGOs in the
political landscape.

The work of civil society theorists, such as Robert Putnam of Harvard
University, and the dramatic social laboratories of Poland, the
Philippines, and South Africa have served to advance the perception that
democracy cannot prosper unless a society contains an extensive network
of organizations that promote civic engagement, dialogue, and trust
among both acquaintances and strangers. NGOs are perhaps the most
natural and effective response to this need. Furthermore, according to
civil society proponents, such organizations are critical to promoting
the protection of freedoms and social needs as well as the quality of
public information and political interaction.

It is important to remember that many NGOs do not fit the mold of the
grassroots, mass-participation vehicles idealized by many theorists.
However, NGOs often come the closest to engaging directly with those
citizens most affected by but least heard in policy decision-making. The
growth in interest in civil society has thus stimulated interest in NGOs
as an alternative source of information on issues of national and
international concern and as a potential critic of government policy
that can, in theory, speak with a uniquely objective voice independent
of either governmental or business interests.

2. Growing Demand for Information, Analysis, and Action:

In an increasingly interdependent and information-rich world,
governments, policy makers, and citizens face the common problem of
bringing expert knowledge to bear on decision making. Policy makers need
basic information about the societies they govern--about how current
policies are working, possible alternatives, and their likely costs and
consequences. Citizens increasingly demand the same, and NGOs have grown
to be an integral part of the response to this increased demand for
information.

Both policy makers and the general public, however, are often besieged
by more information than they can possibly use. The problem is that this
information can be unsystematic, unreliable, and/or tainted by the
interests of those who are disseminating it. NGOs have an important role
to play in monitoring and facilitating the collection of reliable data
needed to make informed decisions - a role that is particularly
important in developing and transitional countries, where such
information often does not otherwise exist. Furthermore, NGOs, which
tend to focus on a relatively narrow range of issues, are often much
more expert on a given topic than a general policy maker could possibly
be and therefore provide a bank of experience and knowledge to which
officials can turn.

Even when providing reliable information, however, NGOs are hardly
neutral on issues of policy formation. Due to their varied nature, NGOs
often play the interesting dual role of providing information and acting
as an agent of political pressure on the government, leading to
potential conflicts of interest. Transparency and the disclosure of
interests and funding sources here are crucially important, but there
are often few mechanisms to ensure compliance, especially on an
international scale.

3. Growth of States, Non-state, and Inter-state Actors:

The latter part of the twentieth century has seen unprecedented growth
in the number of nation-states, as well as in governmental and
non-governmental organizations. In 1950 there were only fifty nations
and approximately sixty inter-governmental organizations. We now have
four times as many nation-states and inter-governmental organizations
and, as noted earlier, an almost exponential growth in the number of
NGOs.

The forces that drove the expansion of all non-state actors also led to
the astounding proliferation of NGOs. No factor is as significant as the
global trend toward increased democratization and decentralization,
which began with the increase in the number of nation-states after World
War II, and the creation of a host of inter-governmental organizations
(such as the UN, World Bank, and WTO) to which certain powers and
functions were delegated. While the grand vision of a world government
was never fully realized, a seamless web of organizations and
activities, most notably in the areas of low politics, has helped reduce
conflict and facilitate bilateral and multilateral relations.

In our current system of global governance, inter-governmental
institutions work with what The Economist identifies as "an enormous
weakness"--they are limited by the treaties and states that created
them, and therefore subordinated to the national interest of states,
making decisive and responsive action difficult. The embattled public
image developed by these large, centralized bureaucracies has made them
easy targets of "NGO swarm," as NGOs eagerly move to fill the vacuum in
global governance.7 Partly in response to the mass meetings and protests
described earlier, World Bank president Jim Wolfensohn gave some of the
Bank's harshest critics a role in the majority of the Multilateral
Development Banks' work. Over half of World Bank projects are currently
executed in partnership with NGOs. This move, however, has not only
"co-opted" some of the Bank's former critics but also created a
situation in which "NGOs are at the center of World Bank policy, and
moreover often determine it. While the current World Bank is more
transparent, it is also more beholden to a new set of special
interests."8

The ultimate legitimacy and impact of NGOs, therefore, even in work with
institutions such as the World Bank, are still compromised by the lack
of transparency that exists in the NGO community today. This translates
into an increased incentive for organizations such as the World Bank and
the United Nations, which work extensively with NGO partners, to support
the development of a set of standard policies and best practices to
improve third sector transparency and accountability.

4. Improved Communications Technologies:

Extraordinary changes in the technology of communication have also
helped transform the world of NGOs. The widespread diffusion of
knowledge made possible by improvements in information and
telecommunications systems, plus the near-ubiquity of electronic
facsimile machines by the early 1990s, made it possible to transmit
documents almost instantly to virtually anywhere in the world. The
growth of the Internet has furthered an instant, inexpensive, and almost
entirely unregulated flow of information.

NGOs, whose goals for impact often outstrip their budgets, have
benefited greatly from the information age and have found that they can
have a tremendous impact with a small staff. Leaders in the NGO
community agree that NGO growth has been greatly facilitated by the
increased ease in collaboration, and the dissemination of information
across vast distances.9 International consortia of like-minded NGOs have
sprung up across cyberspace to share ideas and coordinate efforts to
push for their adoption into policy.

Contributing to the growth of NGOs has been the fact that the nature of
the present information age makes it increasingly difficult for
authoritarian governments to restrict the inflow of information and
opinions they would prefer to exclude. Increasingly, the only options
are to allow untrammeled access or to bar access to the Internet
entirely. However, the issue of accountability rises again when
discussing NGOs' increasing reliance on cyberspace, a forum in which
there is almost no means for quality control of information. Sham NGOs
can easily be created online and disseminate their views at low cost in
a manner that might prove convincing to an unsophisticated viewer. Thus,
in the cyber-age as in the age of NGOs, the caveat emptor principle is
more appropriate than ever before for those seeking reliable
information.

5. Globalization of NGO Funding:

Although the market for ideas is well established and expanding, even
the most prominent NGOs require constant inflows of money in order to
operate. In both Western countries and the developing world, many
organizations operate with small budgets and minuscule staffs. Thus, the
issue of funding trends and sources is crucial to the discussion of
trends in the development of NGOs because it is the globalization of
funding that has helped create and sustain many of these institutions.
In Africa, Asia, and Latin America, particularly, NGOs often lack
critical tax incentives for donors that foster philanthropic traditions
and in turn encourage local support. As a result, much of the impetus
for NGO activity growth in developing and transitional economies has
been the flow of money from industrialized countries. Many donors have
chosen to work through NGOs out of a concern that their funds may
otherwise be misused.

While international funding has dramatically increased the resources
available to NGOs, it clearly poses problems of its own. Foreign funding
can raise questions about the credibility of an organization's
activities: if foreign donors are providing money for an NGO, might they
be dictating its goals as well? This can be distorted and exploited, and
may even serve as an excuse for an authoritarian leader to shut down
organizations, which was the experience of some East European affiliates
of the Open Society Institute in the 1990s. Less extreme controversies
have also occurred in industrialized nations. Critics have expressed
concern that the use of foreign money to support the work of U.S.-based
NGOs may come with strings attached, or at least cause institutions that
accept money from foreign corporations and foundations to mute any
criticism of the donor country's foreign or domestic policies.

The issue of funding and accountability becomes even more complex when
an NGO operates across national boarders, at which point the need for
NGO transparency and accountability becomes most clear. It is often
almost impossible to accurately track the funding of NGOs based outside
the United States, Europe, Japan, and Australia. Most NGOs in the
developed world have at least achieved financial transparency as a
result of a mix of public and private oversight, regulation, and
accreditation. Every NGO in the United States, for example, must file
its finances annually with the Internal Revenue Service (IRS), the
federal agency in charge of taxation. Once filed and processed, these
reports are accessible to the public. In addition, every U.S. NGO must
register with the state in which it is resident and is required to
publish an annual report. Charitable organizations throughout Europe,
Japan, and Australia are also required to register with their
governments; beyond registration, however, further accountability in
terms of governance and programs is not uniform, and in many cases is
not required. Given the current concerns about security, it is essential
to understand where international NGOs get their funding in order to
understand exactly whose interests they may be, even inadvertently,
promoting. This lack of transparency in the NGO sector is perhaps their
greatest vulnerability, and must be addressed internationally in order
to ensure the integrity and continuity of the work of NGOs. Unlike a
true democratic mandate, however, funding for NGOs is almost impossible
to track. Echoing Steve Rudolph, Peter Tavernise points out that many
foundations do not probe deeply into what exactly is being done with
grant funds in both developed and developing countries. Grant makers'
trustees, who are volunteers, often do not even read grant proposals,
and program officers are often "too busy" with grant applications to
read reports on projects' impact. Thus, while funders are in a prime
position to demand accountability from NGOs, this opportunity is often
lost.

6. Paralysis and Poor Performance of the Public Sector:

While the challenges to the governments in Eastern Europe and the former
Soviet Union were swift and dramatic, there has been a more gradual
erosion of confidence in the leaders and institutions of governments
across the globe. The paralysis and poor performance of policy makers as
well as the seemingly endless stream of scandals involving public
officials and a bloated, unresponsive bureaucracy have led the public to
question the very legitimacy of their governments. We live in a period
when the nation-state is distrusted, or more precisely, its institutions
are considered ineffective and unreliable. Similar to their role in
international governance, NGOs operating on a local level have emerged
in an effort to address the deficiencies of nation-states and the lack
of leadership shown by government officials.

It is important to note, however, that the rapid proliferation of NGOs
has not always resulted in a clearer policymaking scenario. Rather, as
John Paul Lederach, director both of the International Conciliation
Service of the Mennonite Central Committee and the Conflict Analysis and
Transformation Program at Eastern Mennonite University points out, NGO
proliferation has resulted in the development of myriad qualified
institutions to focus on issues in "hitherto inaccessible and neglected
parts of the world." While this is positive, Lederach also points out
that this "has also complicated relief efforts by creating an
extraordinarily complex system which makes medieval Europe look
centralized and ordered by comparison."

Reversing Accountability

True international accountability is for the moment an elusive goal, one
that first requires a comprehensive definition and an answer to the
complicated question, accountability to whom? There is no global method
to ensure that NGOs are accountable to anyone, a fact that leaves their
mandate compromised if NGOs do not as a sector prioritize the
achievement of transparency and accountability. There is a need,
therefore, at the very least, for committed action on the part of NGOs
towards organizational and systemic transparency that is in line with
their role in impacting policy and engaging the public in dialogue on
the challenges facing our world. In a period of intense scrutiny of
governments and corporations, it is only logical that NGOs should be
closely examined.

NGOs have proven their effectiveness in holding large institutions and
governments accountable and exposing them to public scrutiny. In terms
of accountability from the reverse perspective, however, neither the
policy nor academic communities have systematically analyzed the
funding, transparency, and accountability of NGOs. No international
mechanism currently exists in which a meaningful dialogue about these
critical NGO components can take place. This fact both weakens the
credibility of NGOs that, as a sector, cannot claim to be anything close
to models for transparency, and also leaves NGOs as a group vulnerable
as no "industry-wide" standards for transparency and accountability are
in place. Kumi Naidoo, president of CIVICUS, a civil society advocacy
group, captures the importance of this issue when he addresses civil
society organizations (CSOs):

In seeking to improve our accountability and transparency, we need not
be defensive or apologize for our work. [CSOs must] think critically
about long-term viability, especially when some government and business
leaders are questioning the legitimacy of CSOs, and when CSOs operating
in new conditions of political instability are increasingly being asked
to be transparent, legitimate, and accountable.

Civil society organizations must meet this challenge head on by making
themselves more accountable and transparent. Maintaining public trust in
CSOs is critical for ensuring active, participatory democracy, which can
enrich our public life at the national and global levels.10

We should not be afraid to ask who holds groups working in the public
interest accountable or, as a New York Times article put it, "Asking
Do-Gooders to Prove They Do Good."11 In the final analysis, the NGO
community must be willing to practice what they preach or they will risk
losing both their credibility and their independence. The diversity of
the NGO sector is, in many cases, a source of disorganization.
Observations such as John Paul Lederach's thus represent a further call
to NGOs to ensure that their work is not jeopardized by weaknesses in
their sector. The kind of dialogue and coordination that would be
necessary for NGOs to achieve significant advances in terms of the
creation of norms for transparency and a framework for discussion of
accountability would also have the attractive benefit of creating an NGO
sector that is more self-aware, cohesive, and therefore effective.

Bridging the Credibility Gap

The proliferation of NGOs is challenged by the fact that the impact,
nature, and interests of these organizations can each become almost
impossible to measure.12 Despite the fact that NGOs have always played a
role in "sustaining an independent civil society," their proliferation
and the increased scope of their role in every aspect of society now
requires better monitoring and regulation so that they can function
effectively and protect the integrity and independence of the entire
third sector.13 The NGO community holds one of the most significant
roles internationally in maintaining accountability in the private
sector, public sector, and international bureaucracies. It is therefore
vital that the NGO community commit itself to developing a set of
credible and verifiable standards that can be universally applied.

The path toward achieving increased transparency must begin with
systematic international dialogue on the topic within the NGO community.
A primary objective of such dialogue would be a consensus regarding the
state of transparency in the NGO community and the establishment of
realistic goals for the sector on this issue. These goals must include
an approach that focuses on making the finances, governance, and
programs of NGOs more transparent. These recommendations will take skill
to craft, given the great diversity that exists in the third sector, but
proactive steps in this area are necessary and can serve as a prudent
safeguard against the potential loss of the public's trust. Private
donors, national governments, and international organizations should
actively encourage this effort and provide the resources necessary to
help the NGO community define and implement the principles of
transparency for NGOs worldwide. Once NGO transparency norms are
drafted, a series of fora should be created to promote their adoption
and discuss the importance of transparency to the NGO sector. The
application of the standards need not be inflexible and must take into
consideration the social and political environments in which NGOs
operate, but the basic principles of transparency must not be
compromised if the effort is to be successful.

On transparency, an ideal next step would be committed, coordinated
action toward a plan of action intended to achieve specific goals
regarding transparency as defined by NGOs. This can only be realized if
we create a transnational culture of accountability and greater
transparency within the NGO community that is based on a set of
international best practices and minimum standards that make all NGOs
accountable for their integrity and performance. These standards and
best practices must be developed, implemented, and monitored through an
international inter-sector partnership. NGOs have been vested with great
power, and with that power comes a profound responsibility to all the
citizens of the world. As "the conscience of the world" they must be
beyond reproach so that they remain the keepers of the public trust.

About the Authors: James McGann is the Director of the Think Tanks and
Civil Society Program, Foreign Policy Research Institute. He is also a
member of the political science department at Villanova University. Mary
Johnstone is a consultant for the Office for Trade, Growth, and
Competitiveness at the Organization of American States. She was
previously a Research Assistant in the Think Tanks and Civil Society
Program at FPRI.

Notes

2 See, for example, Jeremy Scott-Joynt, "Charities in Terror Fund
Spotlight," BBC Program, 15 October 2003; "Palestinian Civil Society
Hurt by NGO Funding Scandal," Advocacy Net, 10 April 2003.

3 Jessica Mathews, "Power Shift: The Rise of Global Civil Society,"
Foreign Affairs 76 (January/February 1997); Lester Salamon and Helmut K.
Anheier, The Emerging Not-for-profit Sector: An Overview, (Manchester;
New York: Manchester University Press, 1996).

4 "The Non-Governmental Order: Will NGOs Democratize, or Merely Disrupt,
Global Governance?" The Economist, 11-17 December 1999.

5 Ibid.

6 Pamela R. Aall, NGOs and Conflict Management ( Washington, D.C.:
United States Institute of Peace, 2000).

7 The Economist, 11-17 December 1999. op. cit.

8 Ibid.

9 What is Behind the Current Debate on NGO Accountability? Panel
produced by Keely Stevenson and Phil Collis,
http://skoll.scocialedge.org, Skoll Foundation and Alliance, 19-30
January 2003.

10 Kumi Naidoo, International Journal of Not-for-Profit Law, 6 no. 3,
June 2004.

11 Jon Christensen, "Asking Do-Gooders to Prove They Do Good," New York
Times, 3 January 2004.

12 The Economist, 11-17 December 1999 op. cit.

13 Peter Willetts, "What is a Non-Governmental Organization?" UNESCO
Encyclopedia of Life Support Systems, Section I: Institutional and
Infrastructure Resource Issues, Article 1.44.3.7, Non-Governmental
Organizations ( London: City University).

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