How Will Donors Spend $170 Billion This Year and Next?

In 2019–20, donors will commit roughly $170 billion of public funding to an alphabet soup of international aid organisations, many of which their citizens may never have heard of.

The UK, the US, Japan, and Germany (the four biggest funders in declining order), as well as key participants in multilateral governance and performance assessments will commit this money with no shared vision of the international system they want to build, little useful information about the respective strengths and weaknesses of the organisations, or any strategic overview of each other’s intentions, we argue in a new CGD paper.

Each replenishment will be considered as a separate exercise, ignoring the reality that they are competing for limited donor resources.

Table 1. Likely replenishments in years 2019/2020*

In his celebrated essay about open source software, “The Cathedral and the Bazaar,” Eric Raymond compares a cathedral—built over hundreds of years according to an architect’s blueprint—with the bazaar that springs up unplanned in the market square outside, growing and evolving organically.

In international development, we often talk about the international development architecture as if we were working together to build a cathedral, designed by an architect with an agreed blueprint to which we are all working. But the development system has much more in common with the bazaar outside—a heaving mass of humanity, evolving and growing in real time, with no real plan. People often refer (usually disparagingly) to the development industry, a metaphor which better reflects the reality that the sector consists of a series of separate organisations collaborating and competing, with separate but overlapping objectives, waxing and waning as their ability to convince their stakeholders of their value changes in time. Development is more bazaar than cathedral.

It is with this in mind that our paperconsiders how donors should approach the 2019 replenishments.

The first option which we do not think is desirable, is business as usual. In this scenario, donors will take a series of discrete replenishment decisions, without looking across the system as a whole, and without systematic information about what other donors are planning. The result will be a system that is far less effective overall than it could be. It is as if we unleashed stonemasons into the half-built cathedral, each with expertise and grandiose schemes for finishing the cathedral, but with no common blueprint nor any real idea what each other is trying to achieve.

The second option, which we do not think is likely, is a steering committee of donors, setting an overall budget for each institution, and agreeing a burden share for each donor. There is no point in pretending that we can appoint a common architect, when we all fancy ourselves in that role.

That brings us to our third option, which we think is both feasible and desirable. We propose a series of behavioural nudges, which provide information to donors about the institutions they are funding, and about each other’s’ intentions, and helps the system as a whole evolve towards better outcomes. By providing more information, we can help the bazaar to work better.

Our three proposed nudges

1. Multilateral organisations should be asked to set out, in a comparable format, their offer on several areas of overlap.

2. Increase core funding for multilateral organisations by sunsetting ringfenced trust funds.

3. Use a trusted intermediary to share confidential forecasts of each organisation’s replenishments, to provide an overview of likely outcomes based on each donor’s current intentions.

The 2019 replenishments offer an opportunity to improve resource allocation and change institutional incentives, to achieve much more value for money from global aid. These are a hugely important set of decisions which have, in the past, been based on too little information. Our proposals are not, by themselves, a complete solution to the resource allocation problem. But we think they are practical proposals that will nudge the system in the right direction.