Seeking to emerge from its institutional “childhood,” the Millennium Challenge Corporation (MCC) threw itself a big 10th birthday party in Washington last month. The milestone provides a good point to take stock of whether the MCC has remained faithful to the core of its original mandate: ensuring that developing countries take responsibility to reform themselves and pledge always to fight corruption before they receive U.S. foreign aid.
Twentieth century-style programs such as those of the U.S. Agency for International Development (USAID) tended to promote statist approaches to development that concentrated control of the market, created economic distortions and new opportunities for corruption, and promoted welfare dependence on government. Those were precisely the sorts of programs the MCC was designed to avoid in the new millennium.
A glossy press release produced by the MCC to celebrate its first decade (and make the case for its continued funding by American taxpayers) attempted to demonstrate that the MCC has been living up to the promise to implement a new foreign aid paradigm.
However, a careful analysis of that press release—and more generally of how the MCC has been staffed and which projects have been funded during the Obama Administration—reveals that the MCC has strayed far from that mandate and seems to be morphing into a “mini USAID.” The Obama Administration apparently sees the MCC as just another funding spigot to help achieve the international goals of the progressive movement.
The MCC began operations in 2004 with a mandate from the Bush Administration to break the welfare dependency mindset and move away from the traditional, failed foreign aid model. Recipients were supposed to meet minimum standards on rule of law and corruption indicators and agree to adopt better policies so that they could achieve sustainable economic growth on their own. Countries should not be forever dependent on welfare from the West. Indeed, many early MCC enthusiasts hoped that developing countries would get just one MCC “compact” to wean them off any additional U.S. foreign aid.
MCC enthusiasts promised that the MCC—unlike USAID—would be run by people with extensive private-sector experience. But an analysis by Charlotte Howson of The Heritage Foundation revealed that, of the 21 most senior MCC officials currently on duty, only 4 have had any private-sector experience at all! The rest have experience backgrounds in the government and nonprofit sectors.
They also promised that the MCC would focus intensively on establishing the rule of law and fighting corruption. These are some of the main obstacles holding back most developing countries. Yet a Heritage analysis of MCC budgets since President Obama took office show that such programs—listed under Democracy, Human Rights, and Governance—receive just a tiny fraction of total MCC spending (e.g., in fiscal year 2014 just $4.7 million out of a total $1.454 billion—less than 1 percent).
Another telling sign that rule of law is a low priority for the MCC: In the media package for its 10th anniversary, those formerly highest-priority MCC core values (“Incentivizing Reform,” “Greater Transparency” (or lack of it), and “Holding Partners Accountable”) get sandwiched-in, down the list among higher-profile Obama favorites such as “Gender Equality” and “Investing in People, Infrastructure, and Agriculture.” These look and sound virtually identical to the glossy press releases of USAID boasting of the results of its traditional foreign aid programs.
Meanwhile, the traditional foreign aid community—which has long bridled at the constraints imposed by the MCC corruption indicator on their free-spending foreign aid ways—is increasingly and openly calling for that hard constraint to be dropped altogether.
If that happens, the MCC as a whole should be dropped, too. Chalk it up as a noble experiment that succumbed to the ways of Washington.
