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The Millennium Challenge Account: Soft Power or Collateral Damage?

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Abstract:

In March 2002 President Bush proposed establishing the "Millennium Challenge Account"(MCA), a new foreign aid program designed to provide substantial assistance to low-income countries that are "ruling justly, investing in their people, and encouraging economic freedom." The MCA could bring about the most fundamental changes to U.S. foreign assistance policy since the Kennedy administration. The significance of the initiative lies partly in its scale: the proposed $5-billion annual budget represents a 50-percent increase over the FY02 foreign aid budget and a near doubling in the amount of aid focused strictly on development objectives. Perhaps even more important, the MCA brings with it the opportunity to improve significantly the allocation and delivery of U.S. foreign assistance as well as a recognition of the value of both hard and soft power in the pursuit of a safer and more secure world. If the new program is not implemented carefully, however, it could lead to greater fragmentation and confusion in U.S. foreign assistance policy, weaken the U.S. Agency for International Development (USAID), and impede coordination with other donors. Much will depend on the details of how the MCA is established during its first year, as well as the extent to which the administration implements changes in other assistance programs. This policy brief is a preview to the analysis and recommendations in Challenging Foreign Aid: A Policymaker's Guide to the Millennium Challenge Account by Steven Radelet, available April 30, 2003.