TCS Daily

GaNGOs of New Europe

By Meelis Kitsing - February 13, 2004 12:00 AM

Seeing non-governmental organizations as a tool for curbing corruption in Central and Eastern Europe (CEE) has become a self-fulfilling prophecy. The mind-set idealizes NGOs and is based on the assumption that people working for them are more ethical and "better" than people in other fields. It is perceived they are not governed by the vices of "greed" or "profit motivation" that are supposed to be found in business and politics.

The presumption that NGO people have undergone a sudden transfiguration and become better than business people is nonsense. Their goals may differ, but their approach to problems is constrained by the same rules of the game as in society at large. Comparing the failures of individuals in the market and government with the presumed perfect individuals working for NGOs distorts reality. If corruption occurs in the market and the government, there is no reason to assume it does not occur in NGOs.

In fact, NGOs can be viewed as potential sources of corruption as well as criminal activities. As written by Robert Wade, a professor at the London School of Economics: "Unkind people might observe that al-Qaeda is an NGO, and one with extraordinarily high levels of social capital" (The Economist, 11 October 2001).

Many may disagree with such a view, but it is supported in principle by the understanding that NGOs are often seen as ultimate and formalized representatives of "civil society." It would follow then, that the distinction between Greenpeace and al-Qaeda would be narrowed down to the question of a formal incorporation. While al-Qaeda may not be a "true NGO" in the formal sense and while its actions are believed uncivil by Western standards, it certainly would represent "civil society."

Moreover, a criminal gang that offers protection by using violence in Moscow and a group that tries to "save the world" at a summit meeting by smashing shop windows can both be seen as "not formalized NGOs" that claim to represent the civil society.

Petra Stykow, a social scientist at Humboldt University in Berlin, argues in her article "Russian Mafia and Civil Society" published in the book Civil Society in the Baltic Sea Region (edited by Norbert Götz and Jörg Hackmann, Ashgate, October 2003) that the rise of the mafia stemmed from the nature of civic networks in Russia. The networks, based on a "them vs. us" mentality, did not allow for trusting people outside one's own network. Such social networks did not generate an impersonal general trust and did not allow for bridges to connect different social groups. As some rules were needed to reduce the costs affiliated with every-day transactions, informal rules imposed by criminal groups were widely accepted.

Hence, the Russian mafia is not the outcome of "individualistic" behavior exhibited by Russians, but rather of civil society. The weakness of the Russian state in creating and enforcing laws that govern every-day business allowed criminal groups to exploit this window of opportunity created by the nature of Russian civil society. In addition, the government regulations were subject to widespread mistrust among the population.

In this sense, the emergence of criminal groups in Central and Eastern Europe resembles the warfare between the "natives" and "newcomers" in the movie "Gangs of New York." Of course, the characterization of gangs as informal representatives of the NGOs of New Europe can be seen as an extreme exaggeration.

But at least it considers the possibility that NGOs, as representatives of civil society, are open to a wide range of possibilities. A recent study titled "The 21st Century NGO" by SustainAbility for the United Nations demonstrates that NGOs are often less transparent and accountable than the businesses they tend to criticize. Obviously, organizations closed to external pressures will tend to become inward-looking, a habit which may lead to corruption.

Many NGOs receive taxpayer money through political channels. There is no doubt that government support, particularly in the CEE region, is often biased. It encourages rent-seeking and distorts competition among NGOs by subsidizing some but not others. Furthermore, it often kills initiative and creates perverse incentives by making it easier to apply for a government grant than to convince private individuals to donate money for a cause.

It goes without saying that incentives for potential NGO involvement in corruption are created by government financing. The European Parliament recently organized a public hearing on the awarding of EU contracts to NGOs and on their performance. In the words of Jan Mulder, a Dutch MEP: "It appears that annually EU funds worth €1.5 billion are awarded to NGOs, of which only a limited amount is subject to some form of tendering" (Financial Times, 30 June 2003).

So, even if NGOs in developed democracies and partners of respected international organizations make many multinational businesses look like "choirboys," the expectations of these organizations should be significantly adjusted in Central and Eastern Europe. On the basis of this value-free and mechanical approach to civil society, it is obvious that NGOs are doomed to be the "Trojan horse" in the fight against corruption in the CEE.

It would be unrealistic to expect even the most idealistic NGO, formed around the best practices and obliged to follow the same informal and formal rules, to be able to change the situation. Furthermore, criminal gangs that encourage the exploitation of such informal rules are actually part of civil society itself. The outcome depends on which organized form of society is most effective in its daily activities. An idealistic NGO aiming to replace "discourse of power" with "communitarian discourse" would not beat criminal gangs in this competition. Hence, a civil society where gangs determine informal rules of the game will actually encourage the spread of corruption and criminal activities.

Instead of putting efforts into encouraging and creating new NGOs for the fight against corruption, the advancement of the rule of law would work better. Creating trustworthy formal institutions reduces people's reliance on informal criminal rules. Economic and political openness is another crucial factor for reducing corruption as it leads to increasing competition, which reduces the sustainability of "old-boy networks" and other informal groupings based on "them vs. us" mentality. The good news is that NGOs still can have some role in this work. They can promote rule of law and openness, which would reduce transaction costs for any undertaking and, in doing so, decrease incentives for corrupt behavior.


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