Paul Collier: The crisis in Haiti shows we need a new approach to NGOs

In responding to the Haitian earthquake, Non-Governmental Organisations are the heroes of the hour. Even before the disaster Haiti had 10,000 of them, more per head than anywhere else in the world. They were providing most of the country's schools and health clinics. As the NGOs further scale-up, the already limited capacity of the state has been decimated. Essential as the NGOs have been, this imbalance threatens to leave the state marginalised in the core task of basic service provision.

Marginalisation is dangerous for both existential and practical reasons. The existential danger is that if the state is not visibly providing services, its predominant interface with citizens is as a tax collector, regulator, and bribe taker. This has already bred a cycle of citizen disengagement from government with very low turnout at elections, and extreme cynicism about politicians. People get little and so they expect little; they expect little and so they get little.

The practical consequences of the marginalisation of the state are that, despite their furious denials, NGOs are largely unaccountable and uncoordinated. Inevitably, accountability follows from money. NGOs depend not upon satisfying their users, but upon appealing effectively for donations from aid agencies and ordinary citizens in rich countries. Neither has much knowledge of comparative cost-effectiveness.

Even if such information existed, which it doesn't, how could it be used? The business model of many NGOs is little more than "trust us, we're pretty straight sort of guys". All the NGO workers I encounter are indeed well- intentioned, but cost-effectiveness requires more than good intentions. As to coordination, everyone talks the talk of coordinating, but few want to be coordinated. As a result, there is usually no mechanism even for such elementary needs as the equitable spatial provision of services.

While the reality is that donor agencies fund NGOs to bypass the state, donor rhetoric is about building an effective state. By this they mean the standard 1950s model of service provision in European states: ministries of education and health directly running schools and clinics. It is because this model has not worked in contexts such as Haiti that donors have opted for the NGO bypass. Ministries exist more in form than substance, their functionaries like actors playing roles that merely mimic reality.

It is time to accept that effective state provision of basic services need not be a replica of the European state: institutional design must be fitted to context. What might it look like in places like Haiti? The European model squeezed three functions into one organisation: policy; management of frontline services; and the allocation of money. Where it works, this integration provides the most cost-effective services on earth, but it depends upon the workforce internalising the goals of the organisation. If this is lost there is no floor to incompetence, corruption and inadequacy.

An alternative is to split the functions. Policy setting, such as minimum standards and equitable provision, is inherently political and must remain with government ministries. But ministries need not run all the frontline services. The task of motivating workers, whether by persuading them to share a sense of mission, or by incentive-induced performance, is best left to each organisation to solve. The third function, the allocation of money among frontline providers, needs a specialised public agency. In Haiti, NGOs should be getting their money not from aid agencies and British households but from the government, in return for which they should give the government co-branding. Of course, the money dispensed by the government would ultimately have to come largely from aid agencies and charitable donations, but the government should have a degree of control. How much control?

If the money were simply handed over to the government ministries we would be back with the underlying problem that they lack the organisational capacity, including checks on corruption, to spend money well. What is needed is a hybrid agency run jointly by government and donors. Its function would be to take in money from the donors and disburse it to the frontline – the NGOs, churches and local communities that actually run schools and clinics.

The core job of the agency would be to monitor the comparative performance of these frontline providers, continuously shifting money to the more cost-effective. This would radically simplify the government's task of monitoring the frontline: it is much easier to assess an organisation than each individual worker. The agency could use information technology to empower ordinary users of services. Even in Haiti most people have mobile phones and mass e-assessments could become routine.

The approach offers accountability, efficiency, and national ownership. For different reasons donors, NGOs and ministries are all apprehensive. They prefer business as usual, but unfortunately, business as usual doesn't work.

Paul Collier is Professor of Economics at the University of Oxford