The following post is co-written by Sandra Sequeira, Professor of Development Economics at the London School of Economics and visiting scholar at DRI, and Christian Schornich, who works for the United Nations. The proportion of aid channeled through the UN system shrank from ten percent to five percent over the last eight years. And yet the UN’s massive bureaucratic machinery is not being downsized accordingly. In fact, a complicated web of programs and agencies with a whopping 7,000 overlapping mandates—sometimes even working at cross-purposes— have in recent decades defied numerous bouts of reform.
Three years ago, the UN launched a new initiative entitled “Delivering as One,” meaning that in each country there would be one leader coordinating all agencies in the field, one budgetary framework, and one operational support system. The goal was to increase efficiency, cut waste and pass on administrative savings to programs. Eight countries from Mozambique to Cape Verde volunteered to pioneer this reform. While cutting the fat out of the UN system is a commendable goal, a deeper issue failed to make it to the discussion table: should reform only represent a centripetal force towards becoming one, or a centrifugal force that propels multiple agencies to compete in the market for aid and justify their relevance?
Since the beginning of “Delivering as One,” no departments have been merged and not a single program has been cut. Three years into the process, administrative savings are yet to be calculated because there is no budgetary framework that clearly accounts for the overhead costs of the different agencies and programs.
There is a real danger that the search for “Oneness” has already become just another episode in a series of floundering reforms, where “harmonization” and “integration” really mean covering up inefficiencies and keeping underperforming agencies and programs afloat. But here’s an alternative: the UN could seize the opportunity to rethink its mandate based on its comparative advantage in the current market for aid, and stick to it.
What would happen if the UN stopped thinking of itself as a world government in the business of only providing public goods, where cost-effectiveness is not necessarily the bottom line, and started thinking of itself as an organization actively competing with other agencies in the market for aid? The landscape of aid agencies has changed dramatically since 1945—the UN is now forced to compete against McKinsey when providing technical support to Latin American governments, with the Gates Foundation when fighting HIV/AIDS in Africa, and with the US military when building schools in the foothills of Afghanistan.
The aid market is segmented by fields, and competition varies significantly across them. There are "natural monopolies" which require agencies like the UNHCR to secure the rights and well-being of refugees across political borders, UNRWA, the International Atomic Energy Agency, the International Court of Justice or the WTO. In these fields, a UN monopoly is justified by the high political and fixed costs of setting up an inter-governmental cooperation mechanism, by decreasing marginal costs of providing the service, and by positive network effects.
Other agencies like the United Nations Industrial Development Organization (UNIDO) and the United Nations Development Program (UNDP) operate in highly competitive markets. In more extreme cases, the UN even competes against itself via the International Fund for Agricultural Development (IFAD), the Food and Agriculture Organization (FAO) and the World Food Program (WFP); the United Nations Development Fund for Women (UNIFEM), the Joint United Nations Program on AIDS (UNAIDS), and the United Nations Population Fund (UNFPA); the United Nations Conference on Trade and Development (UNCTAD) and the International Trade Center (ITC), among others.
The UN's search for comparative advantage could be compared to a government deciding which services to provide directly and which services to privatize. Areas in which the benefits of competition can be high through the creation of incentives to deliver high-quality services at the lowest cost possible are prime fields for “privatization.” In these segments of the market for aid, the UN could act as the "aider of last resort" instead of a frontline participant. This would mean specializing in areas in which there is a clear need for large-scale interventions, but where no private corporations, NGOs, civil society or development consulting agencies dare to go. While this would be the path less traveled, it may be the only one that leads to meaningful reform.