The institutional design of funding rules at international organizations: Explaining the transformation in financing the United Nations
| Date | 01 June 2017 |
| Published date | 01 June 2017 |
| DOI | 10.1177/1354066116648755 |
| Author | Erin R. Graham |
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https://doi.org/10.1177/1354066116648755
European Journal of
International Relations
2017, Vol. 23(2) 365 –390
© The Author(s) 2016
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DOI: 10.1177/1354066116648755
journals.sagepub.com/home/ejt
The institutional design of
funding rules at international
organizations: Explaining the
transformation in financing
the United Nations
Erin R. Graham
Drexel University, USA
Abstract
What explains the design and development of funding rules at international
organizations? I investigate this question in the context of the United Nations system,
which has undergone a dramatic shift in financing. Long associated with mandatory
contributions, the United Nations increasingly relies on voluntary resources earmarked
by individual donors. Previous studies have investigated the financing puzzle from a
behavioral perspective and have found that wealthy donors use voluntary funding to
rein in costs and constrain international organization programs. Providing an alternative
theoretical approach, I investigate the financing puzzle from an institutional design
perspective. I provide original United Nations funding rule data to demonstrate that it
is not only funding practices, but also underlying funding rules, that have changed over
time. I theorize how states with favorable views of the United Nations that sought to
expand its activities — rather than those that desired to constrain it — had incentives
to introduce funding rules that offered more flexibility and control to donors. I test
the argument with a longitudinal case study of funding rule design and change at United
Nations economic development institutions. The article expands the institutional design
literature by integrating funding rules as a consequential design component and provides
a novel explanation for changes in United Nations financing.
Keywords
Global governance, institutional design, intergovernmental organization, international
institutions, International Relations, United Nations
Corresponding author:
Erin R. Graham, Department of Politics, Drexel University, 3250 Chestnut Street, Suite 3025, Philadelphia,
PA 19104, USA.
Email: erin.r.graham@drexel.edu
648755EJT0010.1177/1354066116648755European Journal of International RelationsGraham
research-article2016
Article
366 European Journal of International Relations 23(2)
Introduction
When states provide financial support to contemporary international organizations
(IOs) they enjoy a diverse range of funding options. Although many IOs continue to
receive mandatory contributions that are provided as an obligation of membership, most
also accept voluntary funds to fill their coffers. Donors may further choose to attach
conditions to the voluntary contributions they provide by stipulating a country- or pro-
ject-specific use. Growth in the prevalence of this latter type of funding, dubbed
restricted voluntary resources, has caused alarm at a diverse range of prominent IOs,
including the World Health Organization (WHO), International Atomic Energy Agency,
the World Bank, and the Organization of American States (Boureston and Semmel,
2010; Meyer, 2014; WHO, 2011). However, nowhere is the trend more clear, nor has it
produced more debate, than at the United Nations (UN), where state funding practices
have undergone a quiet transformation. The UN still receives mandatory contributions
from member states, but by 1950, voluntary contributions provided an important sup-
plement to UN programs that increased throughout the 20th century. Voluntary funding
then underwent a sea-change in the 1990s, when restricted voluntary resources rose
sharply, increasing by 208% between 1994 and 2009.1 By 2012, fully 73% of contribu-
tions received by UN development institutions came in the form of restricted voluntary
resources (OECD, 2014: 23).
Observers disagree about the wisdom of the shift, but all agree that its implications are
important and widespread. Reliance on restricted contributions alters IO governance
because member state governing bodies do not exercise direct control over those funds
(Graham, 2015). Governing bodies effectively cede control over the distribution of
resources to individual donors, who contract directly with IO staff. This means that in
2012, multilateral governing bodies exercised direct control over just 27% of contribu-
tions made to UN development institutions. Although the ability to earmark contributions
is likely to increase donors’ willingness to contribute, the practice also poses a number of
challenges to IO performance. Restricted contributions are volatile relative to other types
of funding, which can inhibit long-term planning, and IO staff must expend energy and
resources to service a plethora of donor-specific contracts.
Variation in state funding practices has provoked inquiry from International Relations
(IR) scholars (e.g. Eichenauer and Hug, 2014; Reinsberg et al., 2015). One prominent set
of explanations emphasizes powerful states and their desire to assert control over IO
operations and rein in costs. For example, Alger (1973: 13) convincingly argues that the
US reoriented its funding strategy at the UN to increase voluntary contributions while
pursuing reductions in its mandatory obligations in order to reassert control over UN
activities and slow budget growth. Recent work echoes this argument. Individual donors
avoid losses in control that are traditionally associated with multilateral aid by dictating
how their contributions are used (Graham, 2015). For example, Sridhar and Woods
(2013: 2) argue that by placing restrictions on their voluntary contributions, “wealthy
governments might be using their ‘gifts’ to multilateral organizations to further more
purely bilateral initiatives.” Such arguments emphasize the importance of powerful,
wealthy states in explaining the shift to funding methods that offer greater control to
donors, and emphasize their desire to exert influence and limit rising costs.
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