By the early 1980s the more perceptive sectors of the neoliberal ruling classes realized that their policies were polarizing the society and provoking large-scale social discontent. Neoliberal politicians began to finance and promote a parallel strategy "from below," the promotion of "grassroots" organization with an "anti-statist" ideology to intervene among potentially conflictory classes, to create a "social cushion." These organizations were financially dependent on neoliberal sources and were directly involved in competing with socio-political movements for the allegiance of local leaders and activist communities. By the 1990s these organizations, described as "nongovernmental," numbered in the thousands and were receiving close to four billion dollars world-wide.

The confusion concerning the political character of the nongovernmental organizations (NGOs) stems from their earlier history in the 1970s during the days of the dictator-ships. In this period they were active in providing humanitarian support to the victims of the military dictatorship and denouncing human rights violations. The NGOs supported "soup kitchens" which allowed victimized families to survive the first wave of shock treatments administered by the neoliberal dictatorships. This period created a favorable image of NGOs even among the left. They were considered part of the "progressive camp."

Even then, however; the limits of the NGOs were evident. While they attacked the human rights violations of local dictatorships, they rarely denounced the U.S. and European patrons who financed and advised them. Nor was there a serious effort to link the neoliberal economic policies and human rights violations to the new turn in the imperialist system. Obviously the external sources of funding limited the sphere of criticism and human rights action.

As opposition to neoliberalism grew in the early 1980s, the U.S. and European governments and the World Bank increased their funding of NGOs. There is a direct relation between the growth of social movements challenging the neoliberal model and the effort to subvert them by creating alternative forms of social action through the NGOs. The basic point of convergence between the NGOs and the World Bank was their common opposition to "statism." On the surface the NGOs criticized the state from a "left" perspective defending civil society, while the right did so in the name of the market. In reality, however, the World Bank, the neoliberal regimes, and western foundations co-opted and encouraged the NGOs to undermine the national welfare state by providing social services to compensate the victims of the multinational corporations (MNCs). In other words, as the neoliberal regimes at the top devastated communities by inundating the country with cheap imports, extracting external debt payment, abolishing labor legislation, and creating a growing mass of low-paid and unemployed workers, the NGOs were funded to provide "self-help" projects, "popular education," and job training, to temporarily absorb small groups of poor; to co-opt local leaders, and to undermine anti-system struggles.

The NGOs became the "community face" of neoliberalism, intimately related to those at the top and complementing their destructive work with local projects. In effect the neoliberals organized a "pincer" operation or dual strategy. Unfortunately many on the left focused only on "neoliberalism" from above and the outside (International Monetary Fund, World Bank) and not on neoliberalism from below (NGOs, micro-enterprises). A major reason for this oversight was the conversion of many ex-Marxists to the NGO formula and practice. Anti-Statism was the ideological transit ticket from class politics to "community development," from Marxism to the NGOs.

Typically, NGO ideologues counterpose "state" power to "local" power. State power is, they argue, distant from its citizens, autonomous, and arbitrary, and it tends to develop interests different from and opposed to those of its citizens, while local power is necessarily closer and more responsive to the people. But apart from historical cases where the reverse has also been true, this leaves out the essential relation between state and local power-the simple truth that state power wielded by a dominant, exploiting class will undermine progressive local initiatives, while that same power in the hands of progressive forces can reinforce such initiatives.

The counterposition of state and local power has been used to justify the role of NGOs as brokers between local organizations, neoliberal foreign donors (World Bank, Europe, or the United States) and the local free market regimes. But the effect is to strengthen neoliberal regimes by severing the link between local struggles and organizations and national/international political movements. The emphasis on "local activity" serves the neoliberal regimes since it allows its foreign and domestic backers to dominate macro-socio-economic policy and to channel most of the state’s resources toward subsidies for export capitalists and financial institutions.

So while the neoliberals were transferring lucrative state properties to the private rich, the NGOs were not part of the trade union resistance. On the contrary they were active in local private projects, promoting the private enterprise discourse (self-help) in the local communities by focusing on micro-enterprises. The NGOs built ideological bridges between the small-scale capitalists and the monopolies benefiting from privatization—all in the name of "anti-statism" and the building of civil societies. While the rich accumulated vast financial empires from the privatization, the NGO middle class professionals got small sums to finance offices, transportation, and small-scale economic activity.

The important political point is that the NGOs depoliticized sectors of the population, undermined their commitment to public employees, and co-opted potential leaders in small projects. NGOs abstain from public school teacher struggles, as the neoliberal regimes attack public education and public educators. Rarely if ever do NGOs support the strikes and protests against low wages and budget cuts. Since their educational funding comes from the neoliberal governments, they avoid solidarity with public educators in struggle. In practice, "non-governmental" translates into anti-public-spending activities, freeing the bulk of funds for neoliberals to subsidize export capitalists while small sums trickle from the government to NGOs.

In reality non-governmental organizations are not non-governmental. They receive funds from overseas governments or work as private subcontractors of local governments. Frequently they openly collaborate with governmental agencies at home or overseas. This "subcontracting" undermines professionals with fixed contracts, replacing them with contingent professionals. The NGOs cannot provide the long-term comprehensive programs that the welfare state can furnish. Instead they provide limited services to narrow groups of communities. More importantly, their programs are not accountable to the local people but to overseas donors. In that sense NGOs undermine democracy by taking social programs out of the hands of the local people and their elected officials to create dependence on non-elected, overseas officials and their locally anointed officials.

NGOs shift people’s attention and struggles away from the national budget and toward self-exploitation to secure local social services. This allows the neoliberals to cut social budgets and transfer state funds to subsidize bad debts of private banks, and provide loans to exporters. Self exploitation (self-help) means that, in addition to paying taxes to the state and not getting anything in return, working people have to work extra hours with marginal resources, and expend scarce energies to obtain services that the bourgeoisie continues to receive from the state. More fundamentally, the NGO ideology, of "private voluntaristic activity," undermines the sense of the "public": the idea that the government has an obligation to look after its citizens and provide them with life, liberty; and the pursuit of happiness; that the political responsibility’ of the state is essential for the well-being of citizens. Against this notion of public responsibility, the NGOs foster the neoliberal idea of private responsibility’ for social problems and the importance of private resources to solve these problems. In effect they impose a double burden on the poor who continue to pay taxes to finance the neoliberal state to serve the rich, but are left with private self-exploitation to take care of their own needs.

The net effect is a proliferation of NGOs that fragment poor communities into sectoral and sub-sectoral groupings unable to see the larger social picture that afflicts them and even less able to unite in struggle against the system. Recent experience also demonstrates that foreign donors finance projects during "crises" — political and social challenges to the status quo. Once the movements have ebbed they shift funding to NGO-style "collaboration," fitting the NGO projects into the neoliberal agenda. Economic development compatible with the "free market" rather than social organization for social change becomes the dominant item on the funding agenda.

Finally NGOs foster a new type of cultural and economic colonialism and dependency. Projects are designed, or at least approved, based on the "guidelines" and priorities of the imperial centers and their institutions. They are administered and "sold" to communities. Evaluations are done by and for the imperial institutions. Shifts of funding priorities or bad evaluations result in the dumping of groups, communities, farms and cooperatives. Everything and everybody is increasingly disciplined to comply with the donors and project evaluators’ demands. The new viceroys supervise and ensure conformity with the goals, values, and ideologies of the donor as well as the proper use of funds. Where "successes" occur they are heavily dependent on continued outside support, without which they could collapse.

In many ways the hierarchical structures and the forms of transmission of "aid" and training resemble nineteenth-century charity, and the promoters are not very different from Christian missionaries. The NGOs emphasize "self-help" in attacking "paternalism and dependence" on the state. In this competition among NGOs to capture the victims of neoliberals, they receive important subsidies from their counterparts in Europe and the United States. The self-help ideology emphasizes the replacement of public employees by volunteers, and upwardly mobile professionals contracted on a temporary basis. The basic philosophy of the NGO intellectuals is to transform "solidarity" into collaboration and subordination to the macro-economy of neoliberalism, by focusing attention away from state resources of the wealthy classes toward self-exploitation of the poor.

But, while the mass of NGOs are increasingly instruments of neoliberalism, there is a small minority which attempt to develop an alternative strategy that is supportive of anti-imperialist and class politics None of them receive funds from the World Bank, European, or U.S. governmental agencies. They support efforts to link local power to struggles for state power. They link local projects to national socio-political movements: occupying large landed estates, defending public property and national ownership against multinationals. They provide political solidarity to social movements involved in struggles to expropriate land. They’ support women’s struggles linked to class perspectives. They recognize the importance of politics in defining local and immediate struggles. They believe that local organizations should fight at the national level and that national leaders must be accountable to local activists.