Think Tank Warns Against MCA Compromises

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WASHINGTON (Talon News) — In 2002, the Bush administration proposed the Millennium Challenge Account (MCA) to aid in the economic development of third world nations. The program would use a novel approach in its selection of eligible countries and in its criteria for continued assistance. The MCA was designed to focus specifically on accelerating economic growth in countries committed to ruling justly, investing in health and education, and promoting economic freedom.

However, recent compromises during the legislative process have seriously diluted the program by adding provisions that were not part of the original plan. Some of the new additions include promoting gender equality, saving the environment, developing trade unions, and supporting minority- and women-owned business in the United States.


An executive memorandum authored by Paolo Pasicolan of the Heritage Foundation warns that such actions would change the president’s original version into “something that dangerously resembles traditional foreign aid.”

According to Pasicolan, the United States is already the largest bilateral donor to the developing world, contributing $12.9 billion in official development assistance in 2002. 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.

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.

Pasicolan states that in order for the MCA to work properly three things must be done.

First, the plan must focus solely on economic development. Unlike existing aid programs, which often try to simultaneously eradicate poverty, save the environment, and protect U.S. national security, the MCA is intended to focus solely on proven means of promoting economic development. It would provide assistance to countries with, as specified in S. 925, “the demonstrated commitment of the government of the candidate country to just and democratic governance … economic freedom … and investments in the people of such country, including the availability of educational opportunities and health care for all citizens.”

Secondly, the MCA must be fully independent from traditional development assistance for it to develop innovative programs and serve as a model for reform. Congress should therefore establish a new, independent agency to administer the MCA, such as the Millennium Challenge Corporation proposed in the House.

According to Pasicolan, if the MCA is established under the supervision of an existing government department or agency, the institutional objectives and operational paradigms of the lead department could supersede the MCAs. For example, if the State Department is given too much influence over the MCA, as is the case in the Senate bill which gives the State Department three of the five votes on the MCA’s governing board, the MCA’s country selection process could be affected by unrelated considerations, such as a recipient government’s cooperation in the war on terrorism.

The third requirement would be a sunset provision. Ultimately, the MCA is an experimental program that would administer a theoretically sound, if untested, method of delivering foreign aid. As such, it should be given enough time to succeed and then be terminated. If it succeeds, it should be used as a model to reform traditional development assistance. A sunset provision, as in H.R. 2441, would place the onus on the MCA to prove its effectiveness rather than burden Congress with the task of terminating an entrenched bureaucracy.

“As originally proposed, the Millennium Challenge Account offers an opportunity to reform the U.S. aid regime as work requirements changed welfare,” Pasicolan concluded. “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.”