Yes indeed, more and more important.  But it is a complex story.  And non-government organization (NGO) is a terrible term invented by bureaucrats at the United Nations.  Many of us prefer to use the term civil society organization, even if that is a bit vague.

When an economist looks at the world, he or she sees profit maximizing producers, utility maximizing consumers and governments which correct market failures and look after collective welfare.  In reality, the institutional landscape of life is much more complex.  There are many other organizations in society like, to name just a few: charities which try to help people; foundations created by rich businessmen so they give something back to society; churches and temples which look after citizens spiritual welfare and provide an array of social services; and political groups that try to influence the exercise of power in society.

How did all this come about?

If you go back in time, even just a century or two, government was only a minor player in our societies.  Its share in GDP was low.  Political power was exercised by local players like princes, counts and barons.  And in the West, the Church possessed greatest power and wealth, and was a major player in terms of providing charity, health, education and spiritual services, while in Asia temples and monasteries often played a similar role.

In an earlier phase of globalization, Christian churches initially became involved in development as missionary partners of colonial explorers.  The missionaries established schools and hospitals and promoted Western techniques of farming, forestry and construction.  Christianity today, like other major faiths, remains a major catalyst of social service, and motivates many individual donors, workers and organizations in international relief and development efforts.

The next piece of the tale is the rise of humanitarian movements.  150 years ago, Henri Dunant, a Swiss merchant banker, witnessed French and Italian forces clashing with troops of the Austrian empire in one of the bloodiest battles of the 19th century.  His subsequent efforts led directly to the creation of the International Red Cross movement, and also to sixteen European nations signing a treaty – ‘the Geneva Convention’ – pledging to allow medical workers and supplies onto battlefields and to recognize and respect the famous red cross on a white background as an emblem of neutrality.

Such humanitarian organizations have grown steadily in number and size over the last 150 years.  The Save the Children Fund was first established in the UK in 1919 in response to the malnutrition and starvation in Germany.  In 1942, during World War II, a group of British citizens established an Oxford Committee for Famine Relief to send relief supplies to civilians in Greece. ‘OXFAM’ has grown into one of the world’s largest, non- government relief and development networks.  The war in Biafra in the late 1960s gave rise to Médecins Sans Frontières -- the founders were disturbed by the failure of international humanitarian agencies to prevent genocide in Biafra.  Cambodia’s humanitarian crisis in the 1970s also prompted the establishment of Handicap International for landmine victims.

Recent decades have seen the establishment of NGOs in response to global environmental problems.  But many such organizations have quite long historical roots. For example, in 1903 colonial naturalists living in Africa established a Society for the Preservation of the Wild Fauna of the [British] Empire that has endured and evolved into Fauna and Flora International.  The Ecological Society of America, established in 1915, has evolved into The Nature Conservancy, with a global project portfolio.  More recently, the World Wide Fund for Nature was established in 1961 to serve as a ‘Red Cross for Nature’.

There has also been a significant growth in development NGOs in the past few decades.  They have been active both operationally in managing development projects, and also in advocacy work.  In this context, there has been convergence in the positions of environment and development NGOs, as sustainable development has become the buzz concept.  NGOs promoting good governance have also risen in importance with Transparency International (anti-corruption), Amnesty International (human rights) and Freedom House (democracy).

And finally, the past 15 years or so has seen the rise of the anti-globalization movement, led by NGOs like France's ATTAC.  In fact, almost all NGOs are to some extent anti-globalization, even though they themselves have become a global phenomenon.

Most of the NGOs discussed above are Western NGOs, which operate globally.  Most developing countries themselves, including China, have vast numbers of NGOs.  These tend to be smaller, community-based and operational, filling gaps in the delivery of social, health and education services.

While a distinction is made between operational and advocacy (campaigning) NGOs, this distinction is now blurring.  Many operational NGOs increasingly undertake advocacy activities, drawing on the lessons of their field work.  Advocacy NGOs are increasingly more than they, they often function more like research institutes, generating research which is used in their advocacy campaigns.

Operational NGOs tend to raise money for each project, whereas advocacy NGOs derive a significant proportion of their operational income from donations by members.  Donations are supplemented by income from wider, fundraising appeals, and also from bequests.  Some NGOs accept contributions from corporations, and are referred to as BONGOs (business financed NGOs).  This can lead to compromises in the purity of their mission, with some NGOs arguably being 'bought out'.  Other NGOs accept financing from governments; they are referred to as GONGOs (government-financed NGOs).  The European Commission provides substantial financing to NGOs.

In reality, NGOs work increasingly in partnership with other stakeholders like government and international organizations.  Some NGOs function to some extent as implementing agencies for government development co-operation programs.  This can blur the distinction between consulting firms and NGOs.

The governance of NGOs is becoming an important issue.  The classic NGO is created by an inspirational leader, with admirable dreams and ambitions.  But it may not be managed in a business-like manner.  To obtain funding and maintain credibility, NGOs are increasingly having their books audited by accountants, and are trying to operate with the transparency and accountability that they demand of government.

There has always been a tendency to have a romantic image of NGOs.  But they are not all socially minded, left wing organizations.  Some are right wing and lobby for tax breaks for the rich, and also lobby against things like President Obama's health care reform.  Professional associations for lawyers, doctors, etc, could also be considered to be NGOs, even though they serve to promote the professional interests of their members, not the greater public good.  And research institutes and 'think tanks', which are most prevalent in the US, could also be regarded as NGOs.  Especially in the case of US think tanks, it is important to know the source of their funding when interpreting the results of their research.

Some NGO charities are fronts for terrorist groups.  And terrorist groups and crime organisations like Japan's yakuza are by defintion NGOs.

This is a good point to introduce the philanthropic tradition which started in the 19th century with nouveau riche industrialists devoting part of their fortunes to creating charitable trusts or foundations – these are in many ways like NGOs, and in fact foundations often provide financing to NGOs.  The philanthropic tradition is most prevalent in the United States than in Europe.

Private foundations start with an endowment donated by their founder, and each year a proportion of the income from the invested endowment is given away in grant funds.  One of the most prominent early American philanthropists was Andrew Carnegie, the son of a Scottish weaver who settled with his family in Pennsylvania in 1848.  Carnegie started his working life at twelve years of age as a factory hand in a cotton mill, but he went on to make a fortune by establishing a steelworks in Pittsburgh. In 1901, when he was 65, he sold the company for $480 million – a stupendous sum in those days – and devoted the rest of his life to giving that money away. He created over 2,500 free public libraries across the English-speaking world, and endowed a variety of trusts and foundations that continue to this day to support education, science and culture.

In an essay called The Gospel of Wealth, he argued that it was a disgrace to die rich: the wealthy should first dispose of their fortunes for the benefit of the wider community. This idea drew on Carnegie’s contempt for the old and undemocratic power structures of Europe, where landed wealth, titles and privilege passed from generation to generation.  Many other American industrialists also set aside huge sums for charitable purposes like Henry Ford, creator of the Ford Motor Company, who endowed the Ford Foundation; William Kellogg, who amassed a fortune from sales of the breakfast cereal, Corn Flakes, and the Rockefellers, whose interests in oil and banking made them one of America’s great, capitalist families throughout the 20th century, and who created a string of foundations. This philanthropic tradition remains strong among American business leaders today, the most notable example being Bill Gates.

Why has this philanthropic tradition been so stronger in the United States than in Europe?  European nation states were built on the historical legacy of feudalism, and its relationships of social obligation.  In many European countries the state started, from as early as the 17th century, to assume some responsibility for poor relief, education, and care of orphans and elderly people.  And this has carried through to this day.  By contrast, the United States was essentially created by individual pioneers, many of them escaping poverty or religious persecution in Europe. Americans have always accorded paramount importance to freedom of the individual, including freedom from government interference.  Rather than government redistributing private wealth through the tax system, the wealthy themselves decide what, and how, to give back to the community.

Historically, NGOs have made contributions to the world.  While there are many examples, the abolition of slavery and the granting on suffrage (the right to vote) to women are two major issues.  The whole environment movement would not exist without NGOs, which became a major force at the time of the Rio Earth Summit in 1992.  A more recent initiative is the International Campaign to Ban Landmines which is a global network in over 70 countries that works for a world free of antipersonnel landmines and cluster munitions, where landmine and cluster munition survivors can lead fulfilling lives.  The Campaign was awarded the Nobel Peace Prize in recognition of its efforts to bring about the 1997 Mine Ban Treaty. Since then, we have been advocating for the words of the treaty to become a reality, demonstrating on a daily basis that civil society has the power to change the world.

What do NGOs achieve for economic development today?  NGOs have also been major players in promoting human-oriented development strategies.  They have been a major force in driving the growing movement of corporate social responsibility.  They are a powerful force for promoting good, clean governance.  They provide social support that governments are unable or unwilling to provide.  They provide critical humanitarian relief in war-torn and natural disaster-affected areas. And most importantly, they can represent the voices of the poor.

But, while NGOs are usually working for good causes, as with all organizations, they usually have their own agendas!

Reference:

NGOs: the Diverse Origins, Changing Nature and Growing Internationalisation of the Species, by Nick Young, Founding Editor, China Development Brief.  December 2004.

http://www.chinadevelopmentbrief.com/node/297

International Campaign to Ban Landmines

http://www.icbl.org/