New Donors Are Transforming the Global Aid Industry. Is That Really a Good Thing?

Don Mammoser/shutterstock

Don Mammoser/shutterstock

It’s been a decade since development economists William Easterly and Dambisa Moyo excoriated western foreign aid. Since then, ambitious agendas to reform the heaviest hitter of them all—the U.S. Agency for International Development (USAID)—have come and gone, and come again, guided by different slogans that reflect the ideological biases of each administration: USAID Forward under President Obama; the journey to self-reliance under Trump. Still, the aid machine lumbers on with remarkable consistency in its budget, priorities and procurement processes.

Finally, though, we are on the precipice of a new and improved global aid industry, says Raj Kumar, in his informative new book, The Business of Changing the World. Kumar is the co-founder of Devex—the “Bloomberg-style” media platform of the global aid industry. “When we started Devex in 2000, in the dot-com boom, we thought then that the aid industry would be transformed,” he told me in an interview. “But it didn’t happen. Until now.”

According to Kumar, the new aid industry is mainly driven by billionaire philanthropists such as Bill and Melinda Gates, Michael Bloomberg, and Facebook co-founder Dustin Moskovitz and his wife Cari Tuna. These new players have deep pockets and lofty goals, and are steering funds to innovative aid programs and social enterprises. Kumar is optimistic about this “Market World”-driven change in foreign aid, and clearly doesn’t view it as a “charade,” as would Anand Giridharadas.

These new programs mark a shift from a “wholesale model” to a “retail model” of aid, or a move from large-scale projects to a focus on individuals, Kumar says. They are also informed by creative social science methods such as behavioral science, human-centered design and systems thinking.

One promising example is direct cash transfers to the poor, which bypass the global development middlemen altogether, trusting that individuals know best how to boost their fortunes. Moskovitz and Tuna have been the top backers of the cash transfer NGO GiveDirectly.

Other examples include Hello Tractor, an uber-like app for tractors to boost agriculture yields, Kiva and other microfinance platforms to provide finance to entrepreneurs, and the One Acre Fund, which provides loans to farmers to purchase seeds, and has been supported by both the Gates and Skoll foundations. These cutting-edge social enterprises are so popular they now have a special term: slingos, as in “sexy little NGO.”

The new business-savvy aid players, says Kumar, are also responsible for another auspicious feature of the new aid operating system—its focus on results. As he puts it: “The Gateses want an aid industry that works.” Aid is increasingly evaluated, not on good intentions or amount given, but on whether it produces measurable impact.

Kumar provides a useful and balanced overview of some of the latest trends and methods, such as randomized controlled trials, the “effective altruism” movement, and online dashboards that track results in real time using crowdsourced data and cloud-based analytics. Although he lauds the focus on results, he recognizes the limitations of the impact evaluation method that is now recognized as the gold standard in international development: namely, randomized controlled trials (RCTs). As he notes, they are expensive and time-consuming, and you can’t necessarily translate the results to other contexts.

Kumar’s book is an essential primer on the aid industry’s new trends, synthesizing a vast amount of information—and for that reason, it is a must-read for anyone working in the development sector. But I am not sure he has fully grappled with the downside of the results-focused development agenda.

In fact, the emphasis on results may not actually be attributable to the billionaire philanthropists: It has long been central to the public aid bureaucracy. In this 2010 essay, the former USAID administrator Andrew Natsios described the growth of what he called the “counter-bureaucracy,” a raft of oversight, accountability and impact measurement rules at the agency, which he argues are designed to rein in USAID’s power. He contends that this counter-bureaucracy has produced a “very bad case of Obsessive Measurement Disorder,” which ignores a central principle of development theory: Development programs that are most easily measured are also the least transformational.

In Natsios’ view, good development practice requires tolerating a certain amount of uncertainty and risk, prioritizing local ownership and institution-building, and focusing on the longer term—strategies that do not necessarily lend themselves to measurable success in the short term.

Recent critics of the effective altruism movement—which is embraced by Moskovitz and Tuna, along with other newcomers to development philanthropy—have expressed similar arguments. Natsios and the effective altruism critics agree that the obsession with short-term measurable results could lead to an emphasis on “low-hanging fruit” service delivery programs such as cash transfers and vaccine programs at the expense of transformational programs that require a longer time frame to achieve success, such as the building of sustainable government institutions and policy reform advocacy. And in fact, they are correct: Global health, especially vaccination, has become the dominant sector in bilateral aid programs, comprising about 25 percent of USAID’s FY 2019 request, and the largest share of philanthropic development funding.

Natsios and the effective altruism critics also worry that the emphasis on externally measured results undermines the deeper, less visible purpose of development programs: empowering local actors to transform their own countries and communities. Local NGOs or diffuse social movements may not have the technical capacity to produce results quickly or measure impact with RCTs, but that doesn’t mean they shouldn’t be supported if the intrinsic value of community empowerment is taken seriously. Natsios quotes T.E. Lawrence, who wrote in his celebrated memoir Seven Pillars of Wisdom, “Better to let them (the Arabs) do it imperfectly than to do it yourself perfectly, for it is their country, their way, and time is short.”

Kumar is not wrong to celebrate the innovation and the benefits of results-focused development. But I do think it is misguided to do so without seriously acknowledging the risks and thinking through ways to address them. For development donors, both private and public, the main challenge going forward is to retain the focus on results without excluding programs that pursue longer-term goals such as institution-building, policy reform at the global and national levels, and the empowerment of local communities.