Review of Social Economy

ISSN: 0034-6764 (Print) 1470-1162 (Online) Journal homepage: http://www.tandfonline.com/loi/rrse20

NGOs, the State, and Development in Africa

Berhanu Nega & Geoffrey Schneider

To cite this article: Berhanu Nega & Geoffrey Schneider (2014) NGOs, the
State, and Development in Africa, Review of Social Economy, 72:4, 485-503, DOI:
10.1080/00346764.2014.958901

To link to this article: https://doi.org/10.1080/00346764.2014.958901

Published online: 18 Sep 2014.

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Review of Social Economy, 2014
Vol. 72, No. 4, 485–503, http://dx.doi.org/10.1080/00346764.2014.958901

NGOs, the State, and Development in Africa

Berhanu Nega and Geoffrey Schneider
Department of Economics, Bucknell University, Lewisburg,
PA, 17837, USA

Abstract This paper discusses the impact of the rise of non-governmental

organizations (NGOs) and social entrepreneurs on economic development, with a
special focus on how they have been used in Africa. The paper describes the decline
of the state and the rise of NGOs as a force in economic development under
neoliberalism. We then turn to two of the major problems with the roll-back of the
state in Africa: the inherent weaknesses of nonstate actors in the development
process, and the significant cost that is incurred by undermining the role of state. The
paper concludes by suggesting the necessity of reinserting the state as the major
vehicle for economic development, albeit in productive partnership with NGOs and
social entrepreneurs.
Keywords: social entrepreneurship, non-governmental organizations, economic
development, developmental state, Africa
JEL Classifications: L31, O55

INTRODUCTION
Non-governmental organizations (NGOs) and social entrepreneurs, along with
charities and development agencies, are well-intentioned entities that often
improve the lives of people in poor communities. Increasingly, since the
neoliberal revolution in the USA and the UK and in the economics profession in
general, these types of organizations have received greater amounts of resources
and more focus as a potential solution to market failures and development
problems. However, to date, NGOs and social entrepreneurs have yet to achieve
the type of structural transformation necessary for true economic development.
While NGOs and social entrepreneurs could play an important role in the
development process by facilitating the creation of organic, productive,
community-centered organizations that build on local culture and institutions,
q 2014 The Association for Social Economics
 REVIEW OF SOCIAL ECONOMY

they have proven to be no substitute for the state. State-led development and
democratic reforms remain the pre-conditions necessary for structural
transformation and long-term, large-scale development in Africa. Rather than
replacing the role of the state, a much more useful approach would be to determine
how a developmental state could partner with NGOs and social entrepreneurs to
create large-scale structural transformation.
This paper will discuss the impact of the rise of NGOs and social entrepreneurs
on economic development, with a special focus on how they have been used in
Africa. First, we discuss the decline of the state and the rise of NGOs as a force in
economic development under neoliberalism. We then focus on two of the major
problems with the roll-back of the state in Africa: the inherent weaknesses of
nonstate actors in the development process, and the significant cost that is incurred
by undermining the role of the state. We conclude by suggesting the necessity of
reinserting the state as an important vehicle for economic development, albeit in
productive partnership with the private sector, NGOs and social entrepreneurs.
We begin by tracing the history of the decline of the state and the rise of NGOs
that brought us to the current situation.

THE DECLINE OF THE STATE AND THE RISE OF NGOS

AND SOCIAL ENTREPRENEURS
The neoclassical counter revolution in economic theory and its policy ascendance
in Western policy circles started in full swing in the late 1970s and early 1980s
following the election of Margaret Thatcher in the UK and Ronald Reagan in the
USA. The ideological swing from Keynesian theory, that dominated policy-making
since after the great depression, to neoliberalism was itself a product of the
economic problems of stagflation in developed capitalist countries as well as the
unsustainable debt problems of developing countries that manifested itself in
the latter half of the 1970s, which supposedly emanated from Keynesian policy.
The problem was diagnosed as the unwieldy expansion of the state both in its
regulatory functions and as a provider of public goods, as well as its manifest
inefficiency. The popular slogan of the time, stated in Reagan’s inaugural address in
1981, was that “government is not the solution to our problem; government is the
problem” (Reagan 1981).
This diagnosis of the economic crisis comes with a package of theoretically
(ideologically) derived solutions that supposedly apply to all countries under all
circumstances. This package, commonly known as neoliberalism, has a set of
solutions that can be applied to both the developed and developing countries with
some minor tinkering. For developing countries, the policy package comes in the
form of Structural Adjustment Policies under the auspices of the international

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financial institutions (IFIs). At the core of this policy package is a thorough

contraction of the role of the state in economic affairs and its replacement with
private and/or other nonstate actors. This includes privatizing not only parastatals,
where such state-owned economic institutions exist, but also the delivery of public
goods that were hitherto provisioned by state institutions. It also includes
significantly reducing regulations on businesses with the presumption that the
private sector, through competition in the market, will better regulate itself. One of
the most important mechanisms through which this retrenchment of the state is
achieved is through significant reduction in the state’s ability to tax and spend.
Accordingly, cutting taxes became the key policy instrument in developed
countries as well as developing ones, which, with a strong anti-debt bias,
necessarily led to significant cutting of government programs for lack of funds.
For developing countries in Africa, in addition to the privatization programs,
the fiscal side of this retrenchment of the state is achieved through a reduction in
foreign aid that is allocated for state programs and redirecting a significant amount
of foreign aid money to the nonstate sector, including private sector institutions,
NGOs, and community-based organizations (CBOs). According to Dietrich
(2012: 2):

evidence shows that OECD donors channel significant amounts of bilateral assistance
around recipient governments and through non-state development actors: in 2008, OECD
donors committed a total of US $ 112 billion [in foreign aid] and delegated over 30% of
the aid, approximately US $ 41 billion, for implementation through nonstate development
actors, which included NGOs, multilaterals, public –private partnerships, and private
contractors . . . , only to name the more prominent bypass channels. These nonstate actors
are hired for specific project delivery and remain primarily accountable to the donors.
Government-to-government aid, on the other hand, captures flows that directly involve
the recipient government, ranging between budget support and technical assistance.1
The argument for using nonstate actors in various activities including the
provision of public goods is varied and depends on the kind of activity they are
engaged in.
The World Bank, for example, makes a distinction between two kinds of NGOs
on the basis of the kind of activity they engage in. One category is what is known
as operational NGOs who are engaged in the design and implementation of
development projects. Operational NGOs are further divided in to three categories
(CBOs, national organizations, and international organizations) on the basis of the

1 According to Dietrich, the proportion of aid channeled through nonstate actors has been increasing rather
markedly since the late 1970s although the proportion differs significantly from donor to donor. The proportion
ranges from as high as 73% for Sweden to as low as 0.01% for Portugal. The USA provides some 34% of its
bilateral aid through nonstate actors.

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geographic coverage of their activities. The second category is what is referred to

as “advocacy NGOs” whose primary purpose is to promote and defend specific
causes. Like operational NGOs, advocacy NGOs can be community-based,
national, or international organizations.2
These differences aside, there are a set of advantages that nonstate actors
possess in common. These nonstate actors are presumed to be closer to the
targeted public than bureaucratic state institutions because of their strong
grassroots link. Most CBOs in particular are presumed to be rooted in the
community and closely reflect the interests of the community. They are thought to
have a better understanding of the problems of the community, which they are
established to address. Another presumed strength of these nonstate actors is their
supposed expertise in field-based development work. Unlike government
institutions that are located in local urban centers, nonstate actors work in the
field with the affected population giving them a hands on experience and
the expertise that comes with it to better come up with practical solutions to the
problems facing the community. Because these organizations are small and
usually function in specific areas, they have a better capacity to be flexible and
adapt to changing circumstances. NGOs are also credited for using a participatory
approach which involves the community in their development work, which gives
them an edge in providing sustainability to the project even after the organization
that initiated the project is long gone.
The rise of social entrepreneurship,3 beginning with the successes of the
Grameen Bank, and the more recent rise of the idea of social business,4 marks an
intensification of this trend. Bornstein and Davis (2010: 17) argue that Grameen
along with the Bangladesh Rehabilitation Assistance Committee (BRAC)
“demonstrated that it was possible to mitigate poverty on a massive scale”.
Their success has spawned numerous imitators in other developing countries.
In countries with corrupt, ineffective governments, it is tempting to bypass the
state and focus on development via such organizations.
Indeed, it is presumed that service delivery through nonstate actors is cost
effective compared with the provisioning of the same service by state institutions,
simply because of the wasteful nature of most states in general, but more
importantly in ill governed and corrupt states that often prevail in developing

2 For detailed information on conceptual issues and a wide range of other relevant information on NGOs, see the
rich compilation of resources in Duke University Libraries, NGO Guide at: http://library.duke.edu/research/
subject/guides/ngo_guide/igo_ngo_coop/ngo_wb.html.
3 Bornstein and Davis (2010: 1) define social entrepreneurship as “a process by which citizens build or transform
institutions to advance solutions to social problems, such as poverty, illness, illiteracy, environmental destruction,
human rights abuses and corruption, in order to make life better for many.”
4 Yunus (2010: 1) defines a social business as an entity that seeks “to solve a social problem using business
methods, including the creation and sale of products or services.”

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regions such as Africa.5 Advocacy NGOs also have the added advantage in
contributing to good governance by articulating the concerns of civil society and
advocating for the rights of citizens and marginalized groups on a wide variety of
issues ranging from justice and human rights to the protection of the environment.
Thus, we have seen a steady roll back of the state in African countries, and a
steady increase in the use of NGOs to provide basic services and to serve as the
drivers of economic development. However, as we discuss in the next section,
there are major problems with this shift.

THE PROBLEM WITH ROLLING BACK THE STATE

The increasing role of nonstate actors in service delivery and more generally in
development has its critics both because of its theoretical and ideological
underpinnings and more practically from its inability to deliver the goods in
solving the challenges facing developing countries. For the purposes of this paper,
we concentrate on two interrelated issues that revolve around the weaknesses of
the nonstate actors themselves, and the cost of this approach in terms of the
weakening of the state.

Weaknesses of Nonstate Actors

Just as supporters of nonstate institutions highlight the strength of these
institutions in contributing to development, critics identify a host of weaknesses in
the nonstate sector that seriously question the validity of the claim that
development problems of developing countries can be addressed in a meaningful
and sustained way through these institutions. This is not to belittle the good that
they are doing to small targeted communities. What is being questioned is the
degree to which one can take these institutions seriously as a conduit to solve the
deep issues of development by circumventing the role of the state, whether as a
positive force for achieving large scale development or as a potential impediment
to development when its institutional weaknesses are not seriously addressed.
The first issue revolves around the inherent weaknesses of nonstate actors that
emanate from their size, which is supposedly the strength of these institutions.
Nonstate actors are generally small and thus have very limited institutional
capacity. They have limited management expertise particularly in the area of
financial management. Furthermore, the activities pursued by nonstate actors
usually are not sustainable in the sense that once the project period is complete, it

5 For a detailed discussion about the advantages and disadvantages of NGOs with regards to development, see
Lewis and Kanji (2009).

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has to find external financing to sustain itself.6 Nonstate actors are also faulted for
not having a good grasp of the larger sociopolitical and economic milieu in which
they operate, further contributing to the lack of sustainability.7 Some studies even
challenge the claim that NGOs deliver services in a more cost-effective way
compared with government agencies. A case study comparing the cost
effectiveness of providing nutrition services in Bangladesh, for example, found
that “The cost of providing nutrition services per enrollee was US$24.43 for GOB
[Government of Bangladesh] run CNCs and US$29.78 for NGO-run CNCs” Khan
and Ahmed (2003).8
None of these criticisms, however valid, are serious enough to nullify the
tremendous good that most nonstate actors are doing in improving the lives of
people in the areas where they implement their projects. In other words, the ability
of NGOs to address short-run problems in specific communities, such as short-
term famine relief in drought-affected areas or addressing the effect of HIV/AIDS
in a small community devastated by the disease by providing care to the afflicted
or even supplying lifesaving medicine for a short period is not questioned. Such
services, especially in societies where the state is too weak to provide such public
services effectively, are indispensable to save lives and improve the quality of life
of the community where NGOs operate. Even if the criticism that the expansion of
NGOs will have a negative effect on building the capacity of the state in the long
run has any validity, the short-term value of saving lives and improving the
livelihood of specific communities affected by NGO activities could still be
justified on moral and humanitarian grounds. This presents states with a very
difficult dilemma.
The more serious issue is when one considers the degree to which these actors
can substantially replace the state in delivering public services and effectively
play their advocacy role in a large and sustained manner to achieve a society-wide
impact over the long run. This is the notorious problem of scaling up, that merits
serious discussion and that addresses the core disadvantage of the nonstate sector
compared with government-delivered programs. Assuming that small NGOs or
charitable organizations can address a specific problem for narrowly targeted
beneficiaries in a specific community effectively, how much can this model be
replicated to address the same or a similar problem at the societal level? In other

6 It is partly an acknowledgement of this problem, particularly related to financial sustainability of charitable

organizations, which has made “social entrepreneurship” the new and “innovative” mechanism that supposedly
mitigates the problems of both the private sector and the state to address social and developmental problems in
developing countries. On the buzz related to social entrepreneurship, see, for example, Bornstein (2012).
7 For an early summary assessment of the impact of NGOs in development including a look at some of the observed
weaknesses, see “The Impact of NGO Development Projects.” Overseas Development Institute, Briefing Paper 2,
May 1996. https://www.odi.org.uk/publications/briefing/2_96.html.
8 For a summary report on this finding, see http://fex.ennonline.net/20/government.

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words, can the benefits of NGO-based solutions be replicated at the larger society-
wide level?
This issue is important because if the answer to the above issue is negative,
then the effectiveness of NGOs at a small scale cannot be taken as an argument
against addressing society wide problems within the structure of the state.
Whatever the weaknesses of the state, the better route to address society-wide
problems will then be to fix these problems to make the state more effective rather
than to bypass it. Furthermore, if the limited success of NGOs in addressing these
problems is achieved by weakening the state, which ultimately is expected to
address the society wide problem, then the long-run effect of NGO-based
solutions to societal problems could actually be negative rather than positive when
considering long-term developmental impact, even if they produce marginal
benefits at the project level. If on the other hand a scaling up of NGO activities
leads to large bureaucratic organizations with similar impediments as the state,
once again improving the state and making it accountable are a better approach
than having large charitable institutions that are not accountable to the public.
One way to address the issue of scaling up is to significantly increase the
number of NGOs addressing the particular issue working in a larger geographic
space whereby the sum total of these activities combined will address the national
problem. If a specific NGO or charitable organization addresses the issue of, say,
child malnutrition in a specific locality successfully, surely similar charities
working within the same framework and scale across the country can solve the
problem of malnutrition in the whole country. This will supposedly maintain the
relative strength of NGOs in terms of efficiency while also addressing the society-
wide problem. Unfortunately, this is neither a practical nor a cost effective way of
addressing society-wide problems. That is why there is a state in the first place.
The relative weakness of the state in developing countries does not change that.
To illustrate this issue, let us look at the recent example of addressing the problem
of hunger in America.
In 1968, a documentary about hunger in America was aired on CBS that
galvanized the nation to act against hunger in the country. Rather than treating the
issue as a private or charitable activity, a movement to get rid of hunger in the
richest nation on earth forced the government to act. Congress passed a series of
bills to establish government-funded programs, such as the Supplemental
Nutrition Assistance Program that effectively solved the problem within a decade.
The solution was essentially state centered, which reduced the need for charities to
do the same work. At the time the problem was solved, there were about 200
charitable organizations working on hunger in America. Owing to the Reagan
revolution and the rollback of the state that followed, some of these government
programs were eliminated and funding for others significantly reduced. It was

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presumed that such activities (fighting hunger) were better handled by charitable
organizations.9 Currently, there are some 40,000 charities working on hunger in
America, but there are some 50 million Americans who are hungry or food
insecure, 80% of them working Americans. Seventeen million of these food
insecure Americans are children (Ornstein 2011). The debate about hunger in
America is now back on the agenda and those working on the issue are strongly
arguing for a government-based solution, including the continuation of the
government programs that did the trick in the 1970s.10 Surely, there are families
and children who are getting help from these charitable organizations and some of
these charitable organizations are doing a wonderful job. But, a society-wide
problem such as hunger was not solved effectively by charities. It requires a
society-wide response that can only be mobilized through the actions of the state.
As one might surmise, similar problems surface when public services are
privatized in Africa.
In South Africa, the African National Congress (ANC) was persuaded to
embrace neoliberalism immediately after becoming the first democratically
elected government in 1994 (Bond 2000; Ho and Schneider 2002). Their first
foray into neoliberalism, the infamous Growth, Employment, and Redistribution
plan (Bond 2000; Ho and Schneider 2002), included a standard package of
austerity, market liberalization, and privatization. One of the most problematic
policies implemented during this period was the South African government’s
abandoning of the principle of access to clean, inexpensive water as a human right,
and their turn toward market provision of water. McKinley (2005: 182) describes
the shift as follow:

Following the neoliberal economic advice of the World Bank, the International Monetary
Fund and various western governments (and heavy lobbying by private multinational
water companies such as Suez and Biwater), the government drastically decreased grants
and subsidies to local municipalities and city councils, and supported the development of
financial instruments for privatised delivery. This effectively forced local government to
turn to the commercialisation and privatization of basic services as a means of generating
the revenue no longer provided by the state. Many local government structures began to
privatise and/or corporatise public water utilities by entering into service and
management ‘partnerships’ with multinational water corporations.
This resulted in huge price increases on the poor, ranging from 59% to 600%!
In the ensuing months, 10 million people were cut off from access to water due to

9 For recent cuts on these programs, see Berg (2013).

10 That is the argument pushed by a recent powerful documentary on hunger in America “A place at the table.” See
interviews by the producers Lori Silverbush and Kristi Jacobson http://www.thedailyshow.com/watch/tue-
february-26-2013/lori-silverbush – -kristi-jacobson and see also Sprague (2013).

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nonpayment, leading to an increase in cholera outbreaks on a mass scale

(McKinley 2005: 182 –184). Fortunately, an activist campaign was eventually
able to roll back the worst of these changes.
After sluggish growth, rising inequality, and increasing dissatisfaction with the
lack of public services, the ANC government modified their approach to embrace
microfincance and market-based anti-poverty strategies in the Accelerated and
Shared Growth Initiative for South Africa (AsgiSA). AsgiSA stressed the notion
of addressing poverty and unemployment via microfinance and social
entrepreneurship rather than state-led development, drawing on the lessons
from the Grameen Bank.11
First, it is worth pointing out that the experiences of the Grameen Bank,
trumpeted so loudly by Yunus and others, are not all that they appear to be.
A number of analysts cite the fact that microfinance debt actually contributes to
poverty when businesses fail, a frequent occurrence (Bond 2007; Henwood 1998).
More devastating is the critique by Roy (2010), who exposes the essentially
neoliberal character of microfinance in the sense that it promotes free market
ideology and self-reliance while simultaneously establishing the very desperation
of the poor as an opportunity for investment and exploitation.12
Second, microfinance schemes have been unsuccessful in a number of
circumstances. In South Africa, microfinance programs have high costs (wages of
professional staff are quite high) and both rural dwellers and the urban poor
proved unable to generate enough revenue to make credit payments (Bond 2007:
223 –224). Thus, microfinance programs were unable to achieve even modest
levels of success in the South African context, while other market-based policies
also have been unable to make a significant dent in poverty and unemployment
rates (Maharaj et al. 2011).
What the Grameen experience does show us is the potential for scaling up an
NGO initiative. As Nega and Schneider (2014: 369) note, the reports of early
successes of the Grameen Bank and the BRAC led to tremendous financial support
from governments, donors, corporate foundations, and IFIs for these and other
microfinance initiatives. This resulted in a massive expansion of the largest
microfinance institutions of more than 300% from 2005 to 2010 (Nega and
Schneider 2014). Thus, even though there are significant questions about the
ability of microfinance to alleviate poverty (Nega and Schneider 2014), the
Grameen experience does demonstrate the potential for social entrepreneurship to
expand on a national and international scale if it is perceived as a success and can

11 The plan also included large infrastructure projects.

12 See Nega and Schneider (2014) for a critique of microfinance and social entrepreneurship as a strategy for
economic development.

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garner sufficient state and international support. The Grameen Bank solved the
scaling up problem and corrected a market failure in financial markets but failed to
solve large-scale societal problems related to poverty and development.

The Cost of Weakening the State

The problem with bypassing the state and relying on NGOs or private firms to
deliver services has an even more pervasive long-term problem especially in
developing countries. Instead of strengthening the state and making it
accountable, it could further weaken the state and create an illusion that these
services can be delivered by nonstate actors in the long run. There are different
mechanisms through which this weakening of the state can occur. For the purpose
of illustration, we will look at two mechanisms from the experience of a few
African countries.
The first mechanism comes from the implementation of Structural Adjustment
Programs (SAPs) in some of the poorest sub-Saharan African countries where
local governments literally disintegrated in the early phases of the program’s
implementation, resulting in even more extreme impacts than those in South
Africa. Owing to budget cuts, a host of activities and services that used to be
provided by local governments were simply stopped, leading to the replacement of
these local government functions by local or usually international NGOs, who can
provide these services only for a short period. Here is how two NGO workers
describe the situation in southern Africa in the late 1980s after the implementation
of SAPs:

The state is withering away at a local level in countries such as Mozambique and Zambia,
though not quite in the manner that Marx predicted. Gallantly stepping into the breach
come the [northern] NGOs [NNGOs] . . . Whole districts, or sections of once-functioning
government ministries, are handed over to foreigners to run, especially in health and
social services. This process is enhanced as structural adjustment programmes bite ever
deeper . . . The more NNGOs are prepared to move in, the easier it becomes for
governments to reduce support . . . But NNGOs have notoriously short time frames; they
are rarely able (even if willing) to commit themselves for more than 3 years . . . The
example of Mozambique is instructive. There, discovering an absence of (southern)
NGOs, many NNGOs responded by setting up their own operations, rather than working
through the existing government structures . . . This clearly represents a process of
institutional undermining rather than institution building . . . Surely it is a self-fulfilling
prophecy when NNGOs then say that they are forced to become operational because of
weak government structures? (Palmer and Rossiter 1990)
The second mechanism is the weakening of the state and its capacity to
effectively implement projects because of human resource depletion as more

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qualified and capable functionaries seek more lucrative employment in

international NGOs or even establish their own local NGOs. In Ethiopia, for
example, almost all highly capable people who used to work in government
bureaucracies left their government employment to join NGOs because of the
much better pay they can receive working for nonstate actors. Teachers leave
government schools to work for private and other nonstate institutions owing to
the significant differential in compensation. According to a researcher on civil
service pay and turnovers, “there are different reasons for leaving the civil service.
However, the major cause is poor salary scales and non-salary benefits within the
civil service as compared to that of other employers in the country” Mussa (2005).
NGOs generally pay better not only compared with government institutions, but
even compared with private enterprises, making them attractive to the more
capable and resourceful workers, particularly the educated ones. As Table 1
clearly shows, the salary spread between the civil service and international NGOs
can range from at least 1:5.4 to as high as 1:10.8, meaning a job at an international

Table 1: Salaries of Civil Servants Relative to Alternative Employment in the Nonstate

Sectors in Ethiopia

Civil service vs. parastatals

Social science 1:1.3– 1:3.8
Law and engineering 1:2.4– 1:2.9
Civil service vs. private sector
Social science 1:1.6– 1:1.7
Law and engineering 1:1.6– 1:3.3
Medicine 1:2.6– 1:1:42
Teaching 1:1.9– 1:8.3
Civil service vs. national NGOs
Social science 1:2.5– 1:5.5
Law and engineering 1:3.0– 1:4.2
Medicine 1:2.9– 1:3.3
Civil service vs. international NGOs
Social science 1:5.8– 1:10.8
Law and engineering 1:5.4– 1:9.5
Medicine 1:9.1– 1:9.7

Source: Mussa (2005: 9).

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NGO can pay more than 10 times the salary of a civil service employee for a
comparable qualification.
In South Africa, a flight of elite technocrats into the private sector occurred
with the implementation of Black Economic Empowerment programs. The ruling
ANC installed various programs designed to give preferential treatment to firms
headed by black business people in order to establish a black presence in the heart
of the economy. The result was, as Southall (2007) put it, “deployment of party
stalwarts into . . . key sectors of industry.”
Another mechanism through which the state is weakened by this process is by
creating a false pretense that major development problems can be solved without
the involvement of the state, and thus diverting our attention from the main
problem. This is particularly the case in some (not by any means all) of the
advocacy work done by some NGOs which, when controlled by unscrupulous and
self-serving functionaries, ends up becoming part of the problem rather than the
solution. When the conscious and deliberate actions of the state are the main
causes of the harm done to a population, the attempt to find remedy by “working
with the government” or “improving its capacity by providing technical
assistance,” rather than directly confronting and putting pressure on the state to
desist from its actions, might actually end up providing cover for the state’s
egregious violations. In brutal authoritarian countries that put all kinds of
restrictions on NGO activities, some NGOs might even make the devil’s bargain
to work at the behest of governments in order to survive as an institution even if
that means effectively working against the founding principles of the
organization.
A case in point is the NGO “Justice for All: Prison Fellowship Ethiopia” (JFA-
PFE). This NGO, according to its website, is established to bring about “1.
Effective, Fair and Quality Justice; 2. Good governance; and 3. Human Rights
Protection to the fullness [sic]level in Ethiopia.”13 It claims to achieve these
objectives through

engaging itself in building the capacity of justice sector officials of both the federal and
the regional states governments on human rights, good governance and democracy . . .
through empowering justice sector’s officials to that end, improves quality of justice
delivery, respect for and protection of human rights . . . to contribute towards the
betterment of the justice system of Ethiopia, [JFA-PFE] as an NGO to fill the gap, this
could particularly be done through emanating ideas as well as conducting research studies
and providing professional training . . . .” (Justice for All Prison Fellowship Ethiopia
2011)

13 This is the first paragraph you see in its website. See JFA-PFE website at: http://www.jfa-pfe.org.et/Project.php.
Accessed 2 April 2013.

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For its work, JFA-PFE gets almost all of its funding from western donors and
government agencies such as USAID, CIDA, and DFID.14
As anyone familiar with the justice system in Ethiopia knows, none of these
activities have improved, including the justice system and the prison conditions in
the country. On the contrary, the human rights condition in general and the total
capture of the justice system in particular have worsened. The total obliteration of
the justice system and the horrendous condition of prisoners (including all kinds of
torture) were not or had never been a problem related to lack of knowledge
or training of “justice sector officials.” That is why vast sums spent on
training, computerization, or experience sharing trips by these officials, funded by
western donors, could not make a dent. A recent state department human rights
report characterized prison conditions and other human rights abuses in Ethiopia
thus:

Prison and pretrial detention center conditions remained harsh and in some cases life
threatening. Severe overcrowding was common, especially in sleeping quarters. The
government provided approximately eight birr ($0.46) per prisoner per day for food,
water, and health care . . . . Other human rights problems included torture, beating, abuse,
and mistreatment of detainees by security forces; . . . detention without charge and
lengthy pretrial detention; infringement on citizens’ privacy rights, including illegal
searches . . . .15
The reason why these donor/NGO-based interventions do not work is because
the problem is primarily related to the nature of the authoritarian state that is bent on
staying in power by force. A solution to the problem can only be achieved by
reforming the state. NGOs such as JFA-PFE claim that they work to “improve” the
justice system and the human rights conditions of the country by training these same
officials who are perpetrating injustice as part of their policy. The chief executive of
this same NGO, Daniel Gebreselassie, appeared on government-controlled media
to attest to the wonderful conditions of the prison system and the legitimate and
“respectful” treatment of prisoners by prison authorities in the infamous Kaliti and

14 For DFID’s funding for JFA-PFE for 2010/11 see for example, http://projects.dfid.gov.uk/project.aspx?
Project¼ 103005; For an example of Canadian funding through CIDA, see http://www.acdi.gc.ca/acdi-cida/sdi-
idw.nsf/eng/20d02b604f75abbe8525799d006d7535?opendocument; For US funding through USAID, see www.
usaid.gov/gsearch/justice prison fellowship Ethiopia.
15 Country Reports on Human Rights Practices for 2011 United States Department of State, Bureau of Democracy,
Human Rights and Labor, pp. 1 – 3. www.state.gov/documents/organization/186406.pdf. There are numerous
reports about the very difficult human rights and justice system-related problems in Ethiopia. Take a look at any of
the Human Rights Reports on Ethiopia or even the State Department’s annual report on the issue cited above. For
a more comprehensive and recent report on torture and inhumane treatment in Ethiopia’s notorious Police Crime
Investigation Center or otherwise known as “Maekelawi,” see Human Rights Watch’s report “They Want a
Confession: Torture and Ill-Treatment in Ethiopia’s Maekelawi Police Station,” October 2013. www.hrw.org/
reports/2013/10/17/they-want-confession-0.

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Maekelawi prisons, in order to maintain its good relations with the government and
ensure the survival of its NGO when almost all other advocacy organizations were
barred from operating in the country through the Civil Society Organizations (CSO)
law.16 JFA-PFE became part of the propaganda instrument of the state to paint a
pretty picture about human rights conditions in one of the most brutal and repressive
regimes in the continent, demonstrating conclusively that such NGOs have become
part of the problem by becoming an obstacle to a meaningful change, which can
only come by reforming the state itself.17 Although such interventions might
contribute to make the life of a few prisoners more tolerable by marginally
improving their living conditions, their overall and long-term contribution could
actually be negative by delaying and postponing change, which could otherwise be
enhanced if donors directly engage and pressure the state to improve its overall
human rights and governance conditions.
Similarly, the focus on neoliberalism, microlending, and social entrepreneur-
ship in South Africa is a distraction from the need for structural transformation of
the economy. The ANC’s approach to economic development has been to “spread
the market into the very life of the poor through the commodification of basic
services, and the turning of the poor into micro-entrepreneurs relying on micro-
credit” (Maharaj et al. 2011: 56). This includes awarding government contracts to
corporations that donate to NGOs engaged in social entrepreneurship. Thus, the
government is seeking to shift responsibility for development to the private sector
as much as possible. Unfortunately, microfinance and other social entrepreneur-
ship endeavors tend to place the responsibility for poverty and underdevelopment
on the individual, and the state is seen as bearing no responsibility. How
successful has this been as a development strategy? The result of neoliberalism
plus microfinance in South Africa has been increases in inequality, a significant
increase in unemployment, a deterioration in health outcomes, worsening
ecological problems, and a fragile, bubble-prone macroeconomy (Bond 2011).
It is hard to imagine a less-effective development strategy.

16 For an analysis of Ethiopia’s CSO law, see Nega and Milofsky (2011).
17 The tortured relationship between Pastor Daniel Gebreselassie and his role as a propaganda instrument for the
government officially and in public, while at the same time secretly reporting to the American embassy about the
horrendous prison situation that he visits, is a clear case of the conflict between an attempt to keep one’s lucrative
employment even when it means going completely contrary to the principles that one officially espouses as an
NGO, that provides the employment in the first place. Unfortunately, as much as there are honest and committed
advocates that operate under very difficult and risky situations for themselves, there are equally corrupt and self-
serving NGOs whose main concern is to keep the resources flowing to their organization at any expense. One of
the authors of this article confronted the pastor on this same issue in Kality prison in 2007, when he blatantly
became a willing instrument of the government’s lies. For a fascinating analysis of Pastor Daniel’s information to
the US embassy as reported by wikileaks cable of 2007 (Viewing cable 09ADDISABABA737, INSIDE
ETHIOPIA’S JAILS) and his other propaganda services to the regime, see Teshome Debalke’s piece, “The
evidence of Widespread Torture, the Pastor, the elder, the witness, the man of God.” Article posted on 22
September 2011, on http://www.abugidainfo.com/index.php/18871/.

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Just as we have to question the work of NGOs that support a corrupt state, we
must question NGOs that undermine support for state-led development. Here, the
words of Yunus himself are instructive:

I believe that ‘government’, as we know it today, should pull out of most things except for
law enforcement and justice, national defense and foreign policy, and let the private
sector, a ‘Grameenised private sector’, a social-consciousness-driven private sector, take
over their other functions. (Yunus and Jolis 1998: 214)

It is important to understand that the agenda of some NGOs, such as the Grameen
Bank, is to replace the functions of government. Unfortunately, if the history of
economic development is any guide, this is not the best recipe for long-term
growth and structural change.

CONCLUSION: BACK TO THE POLITICALLY ACCOUNTABLE

STATE AS A CRITICAL INSTITUTION OF DEVELOPMENT
The observed failure of the development project sphere headed by the neoliberal
paradigm has led to a massive rethinking about the causes of broad based and
durable development. Development economists studying Africa have been
grappling with this issue since the acknowledged failure of SAPs in the late 1980s,
leading to an explosion of research on the determinants of growth in general, but
more specifically in an attempt to explain Africa’s developmental problems. This
research has brought the role of the state back on the agenda in a more forceful
way than ever before. This is crucial in that, as was argued above, NGOs have
proven unable to serve as the drivers of economic development on their own due
to the following problems:
. The small size of NGOs and the difficulty in scaling them up limits the ability of
NGOs to promote structural change.
. NGOs have proven unable to solve thorny societal problems such as poverty.
. NGOs often serve to weaken the state by drawing away resources and skilled
personnel.
. NGOs undermine support for state-led development by promoting NGO
activity at the expense of state development projects.
. NGOs often support and help to preserve corrupt dictatorships.
The recent publication of “Why Nations Fail,” a fascinating book by Acemoglu
and Robinson (2012), has touched a raw nerve among the development
community (particularly nonstate actors) by forwarding a simple but forceful
thesis to explain long-term development. Acemoglu and Robinson argued that the

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key determinant of long-run development is economic institutions, which

themselves are a product of the political system that prevails in the country.
In countries where extractive institutions prevail, even when short-term growth
could be achieved, long-term development becomes very difficult. In countries
where there are inclusive institutions, broad-based and long-term development
and prosperity prevail.
Whether countries develop inclusive institutions or not is largely a product of
the kind of political system and institutions that prevail in the country.
In societies where government is accountable to its people, where there is
democratic governance, inclusive institutions prevail. On the other hand, where
state power is controlled by a small elite bent on extracting as much riches as
possible for the ruling clique, extractive economic institutions are established
inhibiting prosperity for the majority of the population. In other words, the
nature of the state and its accountability are crucial for the long-term
development of a country. This argument, supported by a wealth of research, has
brought the state back to the center of the development debate. True, other
factors also contribute to development (geography, availability of resources,
etc.), but probably the most important player in the development of a country is
the state. The policy implication of this research is that you cannot ignore or
bypass the state as a development agent if what you are interested is in the long-
term prosperity of a nation and its structural transformation. Development is
helped by an efficient, accountable state, while it is seriously hurt by a lack of it.
Thus, anyone genuinely interested in long-run development cannot hope to
achieve this objective by ignoring the state or bypassing its key functions to
nonstate actors. If the state is inefficient, then the solution is to make it efficient.
If the state is corrupt and not sufficiently accountable, then the solution is to
make the state accountable to the public. This goes completely contrary to the
paradigm that prevailed since the late 1970s and that sought to achieve
development through nonstate actors. That is why there was a very strong
opposition to the Acemoglu and Robinson book by key NGO actors such as Bill
Gates, as well as the “academic entrepreneurs”18 such as Jeff Sachs, who push
for foreign aid as a solution to the development problems of developing
countries in general and Africa in particular.19

18 This is a term used by Jagdish Bhagwati to refer to academics (he includes Sachs, here) who sell themselves in the
service of dictatorship. See Alemayehu G. Mariam’s (2010) piece “Lessons From Columbia U.,” Sunday, October
3rd. http://www.ethiopianreview.com/content/tag/jagdish-bhagwati-ethiopia.
19 For the fascinating debate triggered by Why Nations Fail, see the articles by various reviewers and responses by
the authors on their blog: http://whynationsfail.com/. Of particular interest will be the review by Bill Gates on 26
February 2013 on the gatesnotes blog: http://www.thegatesnotes.com/Books/Personal/Why-Nations-Fail and
Sachs (2012).

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Nevertheless, NGOs and social entrepreneurs can play an important role in

economic development. They can be a very effective generator of new approaches
and ideas, which could then be scaled up when partnered with an efficient, non-
corrupt state. Africa needs the new ideas generated by creative, community-
oriented people. But we should be under no illusions that such efforts will lead to
large-scale development without the appropriate state institutions and support.

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NOTES ON CONTRIBUTORS
Geoffrey E. Schneider is Professor of Economics at Bucknell University.
Professor Schneider received a BA in economics from Northwestern University
and a Ph.D. in economics from the University of North Carolina, Chapel Hill.
He has co-authored two books, Introduction to Political Economy (Dollars and
Sense) and Economics: A Tool for Critically Understanding Society (Addison
Wesley), and has authored or co-authored articles in the Journal of Economic
Issues, The Review of Social Economy, The Review of Radical Political
Economics, The Forum for Social Economics, and Feminist Economics. His most
recent research is on the theory of comparative institutional advantage and issues
of democracy and development in Africa. He is also an award-winning teacher,
the author of several articles on pedagogy, and guest editor of a special issue of the
Forum for Social Economics on Teaching Heterodox Economics.

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Berhanu Nega is an Associate Professor of Economics at Bucknell University.

He earned his Ph.D. in economics at the New School for Social Research. He was
the President of the Ethiopian Economics Association and served as the first
director of the Ethiopian Economic Policy Research Institute. He has published
articles in different journals in areas related to African Economic Development
and the link between democracy and development.

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