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The Millennium Challenge Corporation: An Opportunity for the Next President

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Publication Date: December 2008

Publisher(s): Brookings Institution

Author(s): Lex Rieffel; James W. Fox

Topic: Government (Foreign relations)
International relations (International relief and humanitarian assistance)
Social conditions (Poverty and homelessness)

Keywords: development; foreign aid; global poverty

Type: Report

Abstract:

The Millennium Challenge Corporation (MCC) is one of the brilliant innovations of the eight-year Bush presidency. It is brilliant because it was designed expressly to avoid the shortcomings that have plagued other aid programs for decades. It is innovative because no other aid agency has such a purposeful mandate, such operational flexibility, and such muscle.

The MCC started off on the wrong foot in 2004. New leadership a year later put the MCC back on track, but the federal government's severe budget constraints and the MCC's inability to show results could jeopardize the agency's existence.

The latest jockeying for the fiscal year 2009 budget serves as a sobering example. The Appropriations Subcommittee in the House of Representatives pushed back against an increase, recommending instead the same amount appropriated the year before ($1.54 billion), while the Senate appropriators offered $254 million, nearly $2 billion below the administration's request of $2.225 billion. The Obama administration and the new Congress will have an opportunity to give the Millennium Challenge approach a new lease on life that could enable it to achieve its potential as the world's most effective catalyst for economic growth.

The main complaints about the MCC are that it has disbursed only a small fraction of the funds appropriated to it by the Congress, and it has not yet produced any measurable results. These are not real problems. They reflect unrealistic expectations.

The biggest problem we see is risk aversion. Under pressure to prove it is not wasting taxpayer monies, the MCC has opted to use familiar techniques and partners, and to push for early results. These choices could ultimately doom the concept. Development is a messy process. Impatience is the chief enemy of effective development assistance. With highly visible domestic problems, such as our health care and financial systems, it is especially unhelpful to expect developing countries to achieve quick and efficient results.