When President George W. Bush proposed the Millennium Challenge Account (MCA) in 2002, he envisioned a new, performance-based foreign aid program that would serve as a model to reform existing development assistance. Unlike traditional aid, burdened with multiple and sometimes conflicting objectives, the MCA would focus solely on economic development. And because foreign aid works best by accelerating economic development in countries with sound policies, MCA aid would be distributed only to those countries most committed to governing justly, investing in health and education, and promoting economic freedom--policy areas empirically related to economic development. By minimizing political considerations and creating an incentive for recipient countries to enact good policies, the Bush Administration hopes to create a situation in which poor countries benefit not only from development assistance programs, but also from the competition to qualify for them.
Sadly, the political compromises struck during the legislative process have diluted the President's original vision for the MCA into something that dangerously resembles traditional foreign aid. The MCA, as laid out in the Foreign Relations Authorization Act, Fiscal Year 2004 (S. 925), and the Millennium Challenge Account Authorization and Peace Corps Expansion Act of 2003 (H.R. 2441), is looking less like the intended experimental, potentially transformational program and more like just a $5 billion increase in foreign aid. To prevent this, Congress should mandate three things. First, qualification for the MCA should be based solely on a country's commitment to govern justly, invest in health and education, and promote economic freedom. Second, the MCA should be administered by an agency with leadership fully independent from the existing aid regime. Third, the MCA should be terminated after a period sufficient to determine its effectiveness vis-à-vis traditional development assistance.
Many believe that America is not spending enough on foreign aid, but the United States is already the largest bilateral donor to the developing world, contributing $12.9 billion in official development assistance in 2002--more than the annual economic output of the Ivory Coast. However, the money has been spent poorly. Most recipients of U.S. development assistance are poorer now than they were before first receiving U.S. aid.
President Bush's Millennium Challenge Account proposal has received widespread bipartisan support because it offers a better way of helping the world's poor. Key to its success will be its focus on promoting economic development and its independence from the existing aid regime. Regrettably, certain parts of both the House and Senate bills establishing the MCA undermine the proposal's innovative aspects. To restore the MCA to its original state, Congress should do three things.
As originally proposed, the Millennium Challenge Account offers an opportunity to reform the U.S. aid regime as work requirements changed welfare. However, unless it is allowed to focus solely on economic development and operate independently from existing aid-giving institutions, the MCA will become just another redundant $5 billion bureaucracy.
David Rueckel, an intern in the Asian Studies Center, contributed to this paper.