Transparent Funding and “Foreign Agents”

Unregulated money in politics hollows out our democracies from the inside. The 2024 US elections made this painfully obvious. The warnings had been loud and clear ever since the Supreme Court’s Citizens United ruling in 2010. Democracy has been brought to the brink; some would argue, beyond. Not because Donald Trump won, but because both major parties are thoroughly and openly, even proudly, beholden to big donors.

Alarm at money in politics is not limited to the United States. In 2021, Austrians were part shocked, part grimly amused by the discovery that Thomas Schmid, a senior political appointee in the Ministry of Finance, had texted tax officials the memorable line “Don’t forget, you are the whore of the rich” when urging favorable treatment for a politically connected entrepreneur. Soon more evidence surfaced: in return for convenient laws and pliable judicial appointees, the country’s big businesses had offered political donations and lucrative seats on company boards. In another chat, the formidable moral philosopher Schmid said something we all know: “He who pays the piper calls the tune.”

Money and power are inseparably connected, and money flowing from powerful interest groups therefore needs to be publicized, thoroughly scrutinized, and regulated. We know this. But we do not apply this knowledge when we funnel our money into the NGOs and political systems of the Global South.

Citizens United told a tale that unlimited and nontransparent money flowing into politics is an indispensable component of freedom of speech. Immediately and intuitively, we understand how problematic this is: how this interpretation twists the concepts of freedom and speech beyond recognition, weaponizing them for powerful interests.

Similarly, when an advisory opinion of the Venice Commission, the Council of Europe’s constitutional law advisors, in its analysis of the “Law on Transparency of Foreign Influence” recently adopted by the Republic of Georgia argues that requiring NGOs to disclose foreign financing violates freedom of association, our ears should prick up. It should be obvious that this interpretation takes freedom of association into uncharted territory. After all, foreign funding for NGOs touches on fundamental questions about democracy and sovereignty, about power and who can be held accountable for how it is wielded.

The regulatory purpose of freedom of association, one of the classic liberal civil rights, is to limit the power of the state, by creating protected spaces for people to come together and pool their action and resources to pursue their political, cultural, and social objectives. Because it defines the relationship between citizens and the state, freedom of association, like most other civil rights, was not conceived as transnational. It was never, and is not now, meant to enable transnational financial flows and to keep them as secret as possible, regardless of whether this might erode a country’s sovereignty.

It should make us think twice that this new interpretation by the Venice Commission (echoed by the United Nations and other international organizations) defines financial flows from rich, powerful countries into poor, developing countries as a “right” and does not pay any heed to the enormous discrepancy of power between donor and recipient countries. Significantly, the Supreme Court of India has pointedly declined such an interpretation: “Receiving foreign donations cannot be an absolute or even a vested right.”

The discussion about “foreign agent” laws, which regulate the financing of NGOs from abroad, has often been led dishonestly, at the very least superficially and with distortions. During the most recent controversy around such a law in Georgia in spring 2024, a whole phalanx of European representatives issued full-throated warnings about how the law would violate EU norms. But nonprofit organizations explicitly do not fall into the regulatory competence of the EU: there is no EU norm the Georgian law could violate.

The Beam in Our Own Eye

Above all, the West does not see the beam in its own eye. For more than twenty years, Western governments and foundations have claimed a majority stake in Georgia’s political and social developments: in a country that received some of the highest per capita foreign aid for years and has been on the path of EU integration for a decade, foreign donors and international financial institutions have long dictated laws and reforms, and even opened offices right inside ministries, where they also top up officials’ salaries. Academics’ income often depends on foreign grants; in fact, entire universities do. The NGO sector, which is virtually all foreign-funded, forms the largest part of Georgia’s middle class and generates many of the political ideas and much of the mobilization that opposition parties rely on. Practically all media that styles itself “independent” is foreign-funded, some or all of it coming from governments. This has unfolded quite openly and for much of that time with the enthusiastic collaboration of Georgian decision-makers and elites.

But by 2020, this arrangement was beginning to show cracks. Under the ruling Georgian Dream party, Georgia might have excelled at adopting the technocratic reforms prescribed by its Western partners, but the latter nevertheless tried to squeeze Georgian Dream out of power. First partially, via a power-sharing scheme devised by the EU; then, after Russia’s 2022 invasion of Ukraine, increasingly urgently; and finally, before elections in October 2024, openly so. Throughout, Western governments kept funding a powerful and vocal group of partisan NGOs that variously called for sanctioning, ousting, or toppling the government. So in spring 2023, the Georgian government first introduced a law that would oblige foreign-funded NGOs to disclose their finances. After a year of intermittent, large-scale protests, it was adopted.

Once the Georgian government started to push back against the foreign hold on the country’s NGOs, media, policymaking, and politics, it faced shrill accusations of secret pacts with Russia and being under Vladimir Putin’s influence — never mind the lack of evidence.

This double standard is barely ever acknowledged and never questioned, since according to a tacit consensus, the West is in the influence game only because we want what’s best for Georgia and would never seek any advantage from “protecting Georgian democracy” and promoting “reforms” (shorthand for a wide range of legal and political changes favored by foreign partners instead of the electorate). Foreign influence and the erosion of sovereignty are all good, as long as it’s us doing it.

Our discussion of foreign agent legislation around the world also picks an odd and arbitrary starting point — decades too late. Russia’s first “foreign agent law,” passed in fall 2012, is often portrayed as the spark that set off a global trend. This conveniently amplifies the narrative du jour of the axis of autocracy, never mind the inaccuracy. Because even if we count only laws that regulate the NGO sector and not other forms of foreign influence, we find that such laws have been adopted since the 1990s in dozens of very different states around the world: 1991 in Mozambique, 2001 in Ireland, 2009 in Egypt, 2010 in India, and 2011 in Israel.

Help With Drafting Laws

For over twenty years, during late nights at my computer, in donors’ conference rooms in New York or Brussels, and, in my happiest moments, in grassroots groups’ unheated basement offices in Odesa or Bishkek, I fought what felt like a valiant battle on the turf of civil-society promotion, money, and repression: I wrote hundreds of grant applications for and with NGOs, and I lobbied foundations, embassies, and aid agencies on behalf of grassroots activists. Then I watched, again and again, how the money I had secured would enable these activists to do good work yet simultaneously entrap them in a vicious cycle of material and psychological dependence and the political repression that descended on them precisely because their work was funded by foreigners. And then, I tried to mobilize against that fallout too.

In 2016, I took part in an international women’s rights conference, where we talked about the “shrinking space.” At the time, that term was being circulated — in appropriately somber tones, eyes wide with alarm — around the global NGO scene and stood for a supposedly new and especially malignant threat to upright activists like us. My boss at the time, who had been in the wars (figuratively and also literally, working in conflict zones) and led a women’s organization more than a hundred years old, stated dryly: “This problem suddenly acquired a name when donors found they could no longer wire money abroad.” Yet the “shrinking space” discourse made it sound novel and unheard of that activists — people who rattle the foundations of power — face pressure from the powerful. Or as if governments and foundations wiring money wherever they pleased was some blissful, virtuous state of nature, which was now coming to an unfair end.

After World War II, in parallel to decolonization, NGOs — tellingly, “nongovernmental organizations” — rose slowly but unstoppably to become one of the main players in international development aid, because donor countries did not trust the (Third World) state with social and economic agendas. Initially, this attitude came from a place of earnest people-to-people solidarity, but it soon developed explicitly neoliberal side effects. And since it was the Cold War, NGOs operating in developing countries were routinely co-opted by Western security services. This did long-term damage to the reputation of NGOs around the world, in almost all cases unjustly.

After the end of the Cold War, interest in NGOs as vehicles of development aid and reforms went through the roof. In some African countries, the share of development aid spent on NGOs rose from 1 to 20 percent in two decades.

In the postcommunist states in between Eastern Europe and Central Asia, the West initially tried to shape political processes directly, and for a while local governments were all for it. But within a few short years, politicians and political parties turned out to be recalcitrant, unwieldy investment objects, arguably because unlike NGOs, they have autonomous power bases in (parts of) the population as well as significant local resources under their control. Donors’ appetite for direct support of political institutions soon waned, while the financing of NGOs increased massively.

Concurrently, the institution of NGOs underwent a dramatic transformation, more rapidly and profoundly in developing countries and especially the former Soviet Union than in the West. Western legislative traditions going back to the nineteenth century reflected the classic civil right of freedom of association and thus provided a regulatory framework for associations in the literal sense: people coming together as members of a club or union, taking action primarily through members’ volunteer activities to benefit each other or the common good, funded by default by membership fees. The NGOs that Western governments finance with their development aid budgets look nothing like this, but more like start-ups run by social entrepreneurs. Instead of members and volunteers, they have bosses and employees organized in strict hierarchies, and hard borders separate those who build lucrative careers managing NGOs from those who benefit from their assistance.

These NGOs serve as technical contractors for development-aid agencies and are often deliberately deployed as political actors, to consult ministries, draft laws, lobby their own and foreign governments, take over core state tasks (though often poorly and unevenly), and support political parties and get involved in election campaigns. All while being financed primarily or exclusively from abroad, with money that largely comes from governments — not, as is often suggested, from private citizens scraping together a few thousand dollars or euros in small donations to send to a village in Moldova, where it will pay for Meals on Wheels for the elderly. This example is taken from real life, but it represents a rare exception in the development aid industry.

Donors like to draw a purely altruistic picture of their funding activities, as if all they ever wanted was to alleviate suffering in Georgia, Moldova, or Malawi, or to reward the “vibrant civil society” that had already existed there authentically, leaving it up to local activists what they would spend the money on. But in reality, deploying NGOs for explicitly political action has long been viewed as the pinnacle of foreign grant-making — the most exalted discipline for the most eminent players, yielding the biggest bang for their buck. Donors view drafting laws and getting them adopted and implemented as the most effective means for leading the societies of the Global South out of their (as they mutter behind the closed doors of the foreign-aid-industrial complex: “self-inflicted”) chronic crisis.

None of this is a secret. Calls for proposals routinely announce quite openly that the projects submitted should aim to get this new law passed or that reform adopted. Once an NGO has won a grant, it may be obliged per the grant contract to get five new laws enacted. This example too is taken from real life.

A Different Civil Society

Resistance against the outsize influence of foreign-funded NGOs began to stir around the world decades before Russia’s notorious foreign agent law. Over the last fifteen years, more and more such laws have been passed. Initially it was in countries that had long been recipients of foreign aid, but in recent years it has happened in wealthy, Western countries too.

Comparisons of the foreign-influence laws of Western states and those of the Global South are often shushed with the argument that such laws in the West are about something else entirely, namely resisting hybrid warfare by Russia or China. We in the West would never, ever dream of limiting foreign funding of NGOs. But that is easily said, since NGOs in Western states receive hardly any foreign funding. Societies make laws only once a problem demanding regulation appears; where there is no problem, there won’t be a law regulating it. The Maldives have no law on mountain rescue operations, and Mongolia has no law on deep-sea fishing.

As it happens, even the era of hypothetical Western openness to transnational funding of our NGOs is nearing its end. Since last year, the European Commission has been hammering out a new directive on “transparency of interest representation carried out on behalf of third countries,” which explicitly includes NGOs as the carriers of such “interest representation.” The United Kingdom and Canada have similar draft bills in the works. Famously in the United States, a law obliging representatives of foreign interests to register has been on the books since 1938: the Foreign Agents Registration Act (FARA).

American democracy-promotion professionals assert with sincere conviction that FARA is nothing at all like those foreign agent laws in Russia, Georgia, or India — that NGOs in the United States would never be pestered with tawdry accusations of working for foreign interests. But the US Department of Justice has been handling this matter quite differently for some time: already in 2020, it found that an American environmental NGO had become a “general contractor” of the Norwegian Agency for Development Cooperation via a grant contract, and that since its actions would influence “any section of the public within the United States,” it was indeed an “agent” of a foreign principal and therefore obliged to register under FARA. The NGO subsequently registered under FARA, if under protest.

Clearly, we are entering an era of increased caution regarding all forms of foreign funding, anywhere in the world. What will be the consequences for the NGO sector? In the West hardly any, since foreign funding of NGOs is negligible. In countries like Georgia, however, where NGOs funded from abroad have turned the political economy and social structures on their head, the end of foreign funding of NGOs would be a major seismic event.

Here some ask, concerned: Can NGOs survive this? It is the wrong question, resting on wrong assumptions. Where is it written that the NGO sector in its current form represents the only possible and simultaneously the best possible civil society in this or that country?

Without foreign grant funding, the majority of NGOs in the Global South would not exist at all. Some groups and movements might have taken radically different forms had such funding not been available. They would have had to rely far more on support from their own population and on the latter’s volunteering and donations, and therefore would have had to listen far more to their fellow citizens and center their concerns in their missions. Or to win the public over to their causes, they would have had to explain their ideas and their work far better. Probably both. Without foreign financing, the NGO sector would have never generated a high-earning, aloof upper class, similar to that of investment bankers and management consultants in the West.

To give an example: in the last decade, a provincial city branch of the famous, Nobel Prize–winning Russian human rights organization Memorial began defending the social rights of disadvantaged groups in court instead of pursuing only its original mission, the documentation of Stalin-era crimes. “Before we can speak to people about the injustices of the past, we must enable them to enjoy justice in the here and now,” their young director told me.

This new focus of their work proved so popular that the organization could increasingly rely on local donations. The elderly board members, who had handed the reins to the new director a few years earlier, added, “In our day, we were very good at writing grant proposals to foreign donors, but we weren’t able to do what this young generation does.” Might things have gone differently for the Russian human rights movement if it had been compelled to turn to its fellow citizens already in the 1990s?

The NGO sector as it currently exists in the Global South and the EU’s periphery — almost entirely foreign-funded, simultaneously bloated and deficient — belongs to the global order of the post–Cold War unipolar moment. That global order is now cracking at the seams. NGOs are no Siberian tigers, worthy of conservation for their own sake. Having realized that, we should not frantically shore up vested interests, but earnestly try to let better, more sustainable, and locally anchored forms of civil society take shape.