FUND FLOW PROBLEMS
Phantom Aid
The amount of money that has been raised for international relief and development assistance is huge.
Fund raising in the aftermath of natural disaster is impressive, and shows how supportive many people are
of development initiatives.
But sadly the relief and development industry is less than candid about how the resources are used and
what is being accomplished.
In 2003 a well know UK based NGO named this Phantom Aid. This is a graphic that gives an indication of the way the fund flow works.
Some years before the phenomenon had
been described as “Black Hole Development” implying that no matter how much fund flow there was, the
results would still be the same!
Value destruction
The amount of money that gets spent and the amount of good that gets done seems to be more and more
unrelated. Five decades or more of teaching MBA students about ways to maximize profit without
teaching much about society has created a very large community of experts in profit maximization and
hardly anyone that has a deep understanding of the social costs and value destruction associated with this
economic paradigm. The problem, however, is worse, because the relief and development industry has
many people well trained in various other disciplines, but with rather little training in this dimension of
economics ... and even less trained in accountancy..
Focus on disbursement ... on activity
Metrics ought to serve the needs of society ... but the easy metric that has been important in the Breton
Woods institutions and their development clones has been disbursement. While there are cases where
disbursement is a useful proxy for results, this is not so when it is used to the exclusion of almost
anything else. Disbursement serves as a fairly good proxy for activity ... but neither can stand in for result
other than in a very controlled and stable environment. Development, when it is successful, is not stable,
but progressing ... and the only metric worth having is a measure of the results.
Sovereignty ... anything goes
The idea of sovereignty that embraces the independence of a people from a foreign power is good ... but
the use of the idea of sovereignty to allow a regime of “anything goes” is not. People are being treated
abominably by governments and elite leaderships ... and external interference is constrained by the idea of
sovereignty. At what point does doing right become the driver of meaningful action?
Weak financial controls
Weak financial controls has been endemic and as a result all sorts of resources have gone missing ...
stolen money ... stolen inventory ... over invoicing ... under delivering. Embezzlement of all sorts ... petty
corruption and grand corruption.
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