Development Aid: The Investment Banks of the Humanitarian Sector

We had some discussions during the last weeks and a few times we ended up with the same question:

Are there institutions / instruments in the Humanitarian / Non-Profit sector that could be compared to the mess in the banking sector specifically with the Investment banks - a species which in that habitat by today got almost extinct.

And yes we found them.

Created during the last decade on the back of the MDG, many have been installed with targets like deregulation of development funding (yes this did happen - aka budgetary aid aka the thin line along institutionalized corruption), avoidance of regulatory frameworks (e.g. via PPPs), avoidance of multi-national oversight across geo-political blocks (to go around the UN) or to just create the illusion of acting / transparency.

And these organizations share many properties with private sector Investment banks:

Fancy names - most of them answer to names like global, facility, fund, emergency plan. They are almost completely unregulated and their activities are at best opaque (they put lots of effort into the illusion of transparency and looking good). They have shown hyper-fast growth over the last decade - some would call that bloated - while nobody really knows what they are doing. They are sucking in enormous amounts of funds (which are then not available otherwise e.g. UN) and nobody knows where the monies have gone to - well with most of the investment banks we know by now, up through the chimneys of the finance world and into the bonus accounts of the fat cats - in a few words - sorry your money’s gone can I have some more.

These organizations like their private sector counterparts put much effort into their image within the public eye and created the illusion that they are the crown of their industries - attracting the best-of-the-best. Well there are a few very good people - or have been some excellent ones - mostly to get those shops running and off the ground or do the plumbing so that those shows don’t fall apart, but we got insides views on both sides and they also share some properties here - full of sorcerer’s apprentices with overinflated egos, overpaid and no sense for ethics or acting responsible with regards to the consequences of potential failure or risk.

And then there are all the vested interests, the networks and influential groups surrounding them.

There are geo-politics groups and power-brokers, corruption levels up to 80% in-country, lots of monies remaining in the donor countries but being counted as aid, people who provided favors somewhere else getting consultancy jobs with up to 10 times the pay of a normal salary / fees in the private sector (that’s the highest we know) - and so on. The best description of the situation and a rather euphemistic one we came across: We’re back to cold war, to 1960s times, when the super powers were playing monopoly with the developing countries. You want development aid: Well we get your Water Works, your Electricity Company and your Park Lane. But all your friends will get a gooood share from our incomes. And then just tell us how you want your monies paid.

So where does all of that lead us to? Well where did we got to after the party was over with the Investment banks?

With the second group we merely know by now. The next two generations - at least - will work off the debts created by them and their friends before a bill will come in that has paid in full stamped over it. And that bill is today already up to a few trillions of dollars.

And that’s potentially one of the few differences (regarding the damages created). The amounts destroyed by their so-called non-profit pendants do look smaller but only in money terms - most likely in the region of a hundred billions plus of dollars. But still generations of people will pay for it and they already today pay with their blood. In difference to their private sector friends there are direct links to those who are dying of diseases, starving or being tortured or terrorized to death.

But then there are - and if nothing changes - there will continue to be enormous profits made in that very special kind of humanitarian aid / non-profit sector.

Note: The group of these so-called multilateral funds / facilities / etc is rather small in numbers but very large by the amounts channeled through them - up to 80% of all development aid today in some areas.

This is the first part of a series of posts (call it a trailer), that will go into the details of how these shows are financed, why there is no accountability, what is happening behind the curtains, which skeletons are in the closets and who is profiteering from that.

Like many of the stories (only a few lately) on our site, the facts presented are backed up with inside knowledge, normally not available or gained through years of experience in the industry.