FEMINISM AND FAMILY: Picking Winners: The Millennium Challenge Accounts
Englehart, Neil A.
HAVING IDENTIFIED weak and failing states as a significant threat to both U.S. security interests and the international order, the Bush administration has failed to formulate any strategy...
...Its new foreign aid initiative replicates this failure, targeting aid to the best-governed low-income states while ignoring the tougher, and in many ways more pressing, plight of poorly governed states...
...What such a record requires is "ruling justly" (promoting human rights and democratization), "investing in people" (education and health care), and "pursuing sound economic policies" (enhancing opportunities for economic well-being...
...There is an ethical interest in reducing poverty, a security interest in creating goodwill and stability, and an economic interest in creating foreign markets for U.S...
...Nor are the worst states likely to improve much on their own, if the conventional economic theory is correct: that competent, effective, and honest bureaucracies are necessary for economic growth...
...on the Political Terror scale...
...By picking countries with good educational and health services, it ignores misery and ignorance...
...The scale 76 n DISSENT / Fall 2004 PICKING WINNERS is inverted here, so that a seven indicates the highest level of political rights, while a one indicates the lowest...
...In March 2002, the administration proposed a new foreign aid program called the Millennium Challenge Accounts (MCA...
...They are the states with the worst records of human rights abuse, as measured by the Political Terror scale, a five-point scale derived from Amnesty International reports...
...States will not grow by themselves into MCA-qualifying status: they must be helped...
...There are multiple reasons to give foreign aid...
...The closest existing program is the Peace Corps, which has the goal of raising educational standards and skill levels in developing countries, and is incidentally the aid program that is most effective at building goodwill for the United States...
...The worst-governed states average 2.25...
...Data will be drawn from various publicly available sources, including the World Bank, Freedom House, the World Health Organization, UNESCO, the Heritage Foundation, and commercial credit rating services...
...It would give them reasons to reform, which they will never have if they feel permanently cut out of the program...
...That honor had been held by Japan until 2001...
...The MCA does solve some problems of existing U.S...
...This is all new money, rather than a re-allocation of funds from elsewhere in the foreign aid budget...
...Indeed, they are the countries that are already most likely to use aid effectively and therefore are in the best position to pay off traditional development loans...
...The countries that do not qualify, and are not likely ever to qualify, are the ones that are worst governed—and those are the countries that have the most severe problems with poverty, lack of education, poor health care, human rights abuse, and political instability...
...Picking Winners Qualifying for the MCA requires states to document a record of good governance...
...The MCA countries average .58...
...Other board members will include the secretary of the treasury, the U.S...
...So the MCA increases the amount of aid, distributes it with less regard to political or strategic interests, is more focused on economic development, provides grants rather than loans, and will perhaps be more efficient...
...The MCA leaves behind the most disadvantaged people in global society...
...However, the emphasis on good governance means that the benefits of the program will go to countries that already enjoy a high level of state capacity...
...No money will be given for military aid...
...The administration has planned for a staff of 100-200 to manage an estimated five billion dollars, one-third of the foreign aid budget...
...As of July 2004, only forty people had been hired, despite the fact that the process of soliciting proposals is well underway...
...By picking well-governed countries, it ignores weak states...
...Despite concessionary rates PICKING WINNERS of interest, the practice of using loans has also generated complaints that aid is designed to make recipient countries more dependent on donors...
...At its May 2004 board meeting, the MCC voted to develop a "threshold country" program to improve governance in states that come very close to meeting the MCA criteria...
...It is unclear what difference this corporate structure will make: the CEO of the corporation will be chosen by and accountable to a board of directors chaired by the secretary of state...
...This discrepancy is not surprising, because the MCA criteria are designed to select precisely such states...
...This compares countries on the basis of literacy rates, life expectancy, and GDP per capita, with a measure ranging from one to zero (in practice, the minimum value is .28—a tie between Sierra Leone and Somalia...
...Without a program to build state capacity, the worst-off states won't improve on their own...
...It is unlikely that the MCA will prevent state collapse, safeguard rights, or improve the standard of living in the worst states...
...aid was given in the form of loans rather than grants...
...aid is manipulated for political purposes, MCA country eligibility is to be determined by "objective and quantifiable" criteria, according to the authorizing legislation...
...It ignores the real problem: how to deal with badly governed countries, the weak states least likely to develop economically, most likely to have high rates of human rights abuses, and most attractive to transnational criminal networks and terrorist organizations...
...security interests and the international order, the Bush administration has failed to formulate any strategy for dealing with these states...
...This article is drawn from his work on state failure...
...Table 1 compares the sixteen worst-governed states in the world, according to the World Bank's measure of "government effectiveness," with the sixteen countries eligible in the program's first year...
...Some Americans have complained that the U.S...
...Solving Problems The MCA was designed to address a number of criticisms of existing foreign aid programs: 74 n DISSENT / Fall 2004 In response to the complaint that U.S...
...In addition, MCA funds are to be used exclusively for economic development...
...The MCA is not a program to assist states to develop better governance...
...NEIL A. ENGLEHART is assistant professor of government and law at Lafayette College...
...By design the program selects the best-governed low-income countries...
...goods...
...foreign aid, but it does this by picking winners and ignoring losers...
...Data are for 2002 where available, or for the nearest available year...
...aid connected to the war on terrorism, including a $600 million package given to Pakistan as a reward for its support in Afghanistan...
...This is an incentive-based approach to foreign aid: make sure that aid is used effectively by giving it only to governments that can demonstrate a record of good governance...
...MCA funds will be administered instead by a Millennium Challenge Corporation...
...If successful, the program could provide incentives to improve governance in qualifying countries, and in countries that come very close to qualifying...
...Five is the worst score DISSENT / Fall 2004 n 75 PICKING WINNERS TABLE 1 MCA Eligible Countries and Worst-Governed States Compared Government Effectiveness Political Terror Political Rights HDI WORST-GOVERNED STATES Afghanistan -1.39 5 1 NA Burma -1.29 3 1 0.55 Burundi -1.46 5 2 0.34 Central African Republic -1.43 3 3 0.36 Congo - Kinshasa -1.60 5 2 0.35 Equatorial Guinea -1.37 3 2 0.66 Guinea - Bissau -1.35 2 4 0.37 Haiti -1.56 3 2 0.47 Iraq -1.64 4 1 0.58 Liberia -1.51 5 2 NA North Korea -1.78 3 1 NA Paraguay -1.29 2 4 0.75 Sierra Leone -1.54 2 4 0.28 Solomon Islands -1.34 3 4 0.63 Somalia -1.97 4 2 0.28 Turkmenistan -1.47 2 1 0.75 Average -1.51 3.47 2.13 0.49 MCA CANDIDATES Armenia -0.42 2 4 0.73 Benin -0.62 2 5 0.41 Bolivia -0.53 2 7 0.67 Cape Verde -0.20 2 7 0.73 Georgia -0.77 2 4 0.75 Ghana 0.01 2 6 0.57 Honduras -0.73 3 5 0.67 Lesotho -0.26 2 4 0.51 Madagascar -0.38 3 6 0.47 Mali -0.84 1 6 0.34 Mongolia -0.18 1 6 0.66 Mozambique -0.41 2 5 0.36 Nicaragua -0.87 2 5 0.64 Senegal -0.18 2 5 0.43 Sri Lanka 0.03 3 5 0.73 Vanuatu -0.64 2 7 0.57 Average -0.44 2.06 5.44 0.58 Scores vary Scale from 1 Scale from 1 Scores vary from +2.5 to (best) to 5 (worst) to 7 between 0 (worst ) -2.5, with a (worst), with a (best), with a and 1 (best), with mean of 1. mean of 3.29...
...The change was due, first, to the weakening value of the yen and then to increased U.S...
...Yet, this advance is achieved by including only the best-governed states in the program and ignoring the rest...
...DISSENT / Fall 2004 n 77...
...USAID does closely monitor aid use and disbursement, in part because a great deal of money has been embezzled or misused by recipient governments in the past, and the monitoring requires a large staff...
...All the data are available on the Internet, and so the process of identifying eligible countries should be completely transparent...
...economy...
...This would extend the logic of the MCA's incentive-based approach to the most poorly-performing countries...
...But it mostly neglects the first two...
...To help those people, we need to add programs specifically designed to address their problems, which are, politically and economically, the hardest problems, and which the administration's new aid policy does not even acknowledge...
...Like most of the OECD countries, the United States will remain far below its commitment to give .7 percent of GNP in aid, made in the Agenda 21 agreement at the Earth Summit in 1992...
...It will, however, firmly establish the United States as the largest single giver of aid...
...The MCA addresses this criticism by using grants rather than loans...
...The worst-governed states average .49 on the HDI, although their score would probably be lower if data were available for all fifteen countries: it is only the relatively better of the worst-governed states that can collect the information that goes into the HDI calculation...
...The improvements could include controlling corruption, developing expertise for competent economic planning, permitting the full exercise of civil and political rights, educating citizens, providing health care, and ensuring security for people and property...
...Yet these are the countries that are already best off and most likely to succeed...
...The board may create greater transparency, but it is unclear that it will create greater efficiency...
...If the small staff of the MCC is up to the task of managing the program, all this together should represent an advance over current practice...
...But this is the great shortcoming of the program...
...Fully four of them are above the global mean of .70...
...mean of 4.55 a mean of .70 SOURCES: Radelet, "Qualifying for the Millennium Challenge Account" (MCA Candidates), Purdue PTS (PTS (Al)), Freedom House (Political Rights ., UNDP Human Development Report (HDI ., Kaufman, Kraay and Mastruzzi, "Governance Matters Ill" (Government Effectiveness...
...This may sound like a reasonable, even enlightened, policy...
...Even if it is able to manage the granting process, this small staff won't be able to monitor the use of grant funds...
...But this still avoids the question of how to help the states in deepest trouble...
...The MCA coun- political rights, measured using the seven-point tries average 2.06, while the worst-governed Freedom House scale: MCA candidates are states average 3.38...
...An addendum to the MCA is needed to assist weak and poorly governed states in developing sufficient state capacity to aspire to be MCA candidates...
...However, this does not represent a dramatic break with current policy...
...As with USAID, Congress will appropriate the MCC's budget, and will thus be able to place significant constraints on the organization...
...The MCA picks countries that are already winners so as to maximize the probability that they will contribute to the global economy, and by extension the U.S...
...In practice, however, it means that these new funds will be targeted at the countries that are most likely to succeed without them...
...The administration seems to be placing enormous faith in the goodness of the governments that get the grants...
...Traditionally most U.S...
...economic assistance programs has been growing, and grants already represent the lion's share of foreign aid...
...The MCA candidates average 5.44, and none receives a score below 4. Finally, the worst-governed states stand at a much lower level on the UN Development Program's composite indicator of economic well-being, the Human Development Index (HDI...
...The additional cash will still leave the United States last among the twenty-two Organization for Economic Cooperation and Development (OECD) countries in foreign aid as a percentage of gross national product, although we may now give Italy some serious competition for twenty-first place...
...None of the worst-governed countries will qualify for the MCA...
...trade representative, the administrator of USAID, and four presidential appointees...
...Agency for International Development, which disburses the bulk of traditional foreign aid, is an inefficient, bloated bureaucracy that attempts to micromanage aid projects...
...THus, THE sixteen states that qualify for the first year of the program not only have better governance, they are also ahead with regard to human rights, political openness, and economic well-being...
...And the governments of these states are likely to welcome assistance framed in terms of improving state capacity to perform routine, system-maintaining tasks—tax collection, law and order, and the extension of central control over regional petty despots...
...aid is inadequate, it proposes a 50 percent increase...
...Eligibility is competitive: countries will need to exceed the mean score for their peer group to qualify, the peer groups being set by gross domestic product per capita cutoff points (less than $1,435/year in 2004...
...Continued grants depend on continued high performance...
...Nor is there any such program in the traditional USAID repertoire...
...By targeting the countries most likely to succeed, the MCA maximizes the probability of achieving the last objective...
...By picking democracies, it ignores human rights abuse...
...Since the 1970s the proportion of grants to loans in U.S...
...This can create a debt burden for countries that fail to use aid effectively, whether because of poor governance or bad luck...
...At a minimum, significant outsourcing of oversight will be required...
...In response to the complaint that U.S...
...Much the same is true for already likely to be more democratic...
Vol. 51 • September 2004 • No. 4
