Tracing the effects of IO financing reforms

Last April Cecilia Cannon was among the many Graduate Institute professors and researchers who went to San Francisco to contribute to the 2018 Annual Convention of the International Studies Association (ISA), which was centred around “Power of Rules and Rule of Power”. A researcher at the Global Governance Centre, Dr Cannon presented a paper on the effects of financing reforms for international organisations (IOs).

What is the rationale behind your paper?

I wrote this paper together with Thomas Biersteker, as part of a three-year Swiss National Science Foundation funded project examining IO design, adaptation, reform and effectiveness. The broader project is being carried out together with Cédric Dupont and Velibor Jakovleski.

The topic is of crucial importance to IOs today as many of them are facing a financial drought. While member states continue to place demands on IOs to meet new global challenges, they are simultaneously slashing their obligatory and voluntary financial contributions, leaving many IOs with no option but to consider diversifying their revenue. Yet there is no one set way to diversify, and little analysis exists to guide IOs and member states as they weigh various financing options. IOs can secure voluntary contributions from private sources through various financing models, and they can also generate revenue by charging fees for services and goods provided.

In this paper, we question whether a fundamental governance shift occurs when IOs receive direct revenue and mandates from private actors – reducing the traditional, intergovernmental nature of IO governance and increasing its multi-stakeholder nature. We contribute to theoretical principal–agent discussions, examining whether this shift decreases member-state control over IOs in favour of control by IO secretariats, and/or control by private donors.

Examining two case studies, we first map the major financing reforms implemented by the World Health Organization (WHO), which relies increasingly on voluntary earmarked contributions from private sources, and the World Intellectual Property Organization (WIPO), which now relies almost entirely on revenue generated from fees charged for goods and services provided. We then trace the effects of these financing reforms on the IOs engagement with member states; and member-state control over the IOs’ programme budgets and activities. We also consider the challenges to be navigated with private-donor financing of IOs, including conflicts of interest, stability and predictability of revenue, and the demands for increased “ownership” of the IO’ mandates and agendas by private funders or fee-paying “clients”.

What are your main findings?

We find that the WHO case challenges scholarly claims that IO bureaucrats make strategic efforts to alter the design of IO financing so as to gain more control over IO activities. Increased earmarked voluntary contributions to WHO, from both member states and private donors, appear to have led not only to decreased control of the organisation by the collective member states, but also to decreased control of the organisation by the IO secretariat, with increased control going to the individual private and member-state donors, who attach strict requirements for how WHO can spend their funds – in specific countries and on specific projects. The organisation now finds itself servicing multiple principals, and acts as an implementation body for these “clients”, answerable directly to them. Meanwhile, the official WHO programme budget collectively approved by member states through the World Health Assembly remains largely un-funded, and the organisation is thus unable to fulfil its collective member-state-driven mandate.

In the WIPO case, generation of income through fees for the various international protection systems administered by WIPO appears to have led to increased control of the secretariat over WIPO activities, and decreased member-state control. Given the highly technical nature of the work carried out at WIPO, and the relatively stable domination of US and Western states in the field of product innovation (and related intellectual property) until recent years, there has been little questioning of WIPO’s allocation of funds to activities. As tensions between the development agenda and protection agenda snowball, and as the United States cedes power in the technology innovation and intellectual property fields to China, and to a lesser extent to the European Union, the United States has started questioning WIPO’s autonomy with respect to the use and allocation of the organisation’s funds generated through fee-paying clients.

Can you share with us your impressions of the ISA Convention?

It’s easy to get lost at ISA conventions – so many speakers, so many interesting panels, so many people to catch up with. This year my plan of attack was to focus on attending panels that examined (1) IO design, including financing IOs and principal–agent discussions; and (2) migration policy. I met new colleagues, continued discussions with former colleagues working on these topics, and caught up with former colleagues who are now based at universities around the world. And I capped off the week hiking on the stunning Californian coast.

This article is based on an interview conducted by the Graduate Institute’s Research Department and was first published on their site.

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