Tuesday, January 13, 2009

5 elements of a new aid system

The race for who will head the large US aid agencies is heating up. Everyone seems to agree that changes to the system are needed. But are we up for real change, or will we settle for  marginal shifts in emphases and organization? I fear that the changes will be marginal, when we need something more fundamental.

Earlier I proposed the 2/3 : 1/3 rule. Under this rule, 2/3 of all aid money would be allocated through bottom-up, market-based mechanisms, and only 1/3 would be allocated via top-down, centrally planned mechanisms. Today the ratio is reversed, which is one reason the productivity of aid is so low.

"Market mechanism" does not necessarily mean "private sector," although it does mean that the private sector and community/civic groups would have equal standing with official aid agencies and large non-profits.

Market mechanism means that the best qualified people and organizations - from any arena - are eligible to carry out the five core elements of any aid (or philanthropy) program:

1. Decide on what problems need to be addressed
2. Decide what the best approaches or solutions to these problems are
3. Fund the initiatives or projects that embody these solutions
4. Implement and supervise the projects on the ground
5. Evaluate the impact of the projects, and how that evaluation is used

The key is to open-source the above elements, and then reward success.  Big official agencies either provide most of these elements in-house, or they rely on a small group of "beltway bandits" to do the work.  And the rewards for success and failure are very muted. 

That may have made sense at one time, when the pool of money and expertise was very limited.  But the world has changed radically in the last fifty years, and now it is time for the aid system to change as well.