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Moving Toward Smarter Aid

This Brookings Policy Brief, co-authored with Jim Fox, made the case for more budget funding of startup Millennium Challenge Corporation.

Executive Summary

The Millennium Challenge Corporation (MCC) is seriously wounded. Unveiled by President Bush in March 2002 as a promising new bilateral aid instrument for tackling global poverty, the most prominent sign of the MCC’s distress was the mid-summer resignation of Paul Applegarth, its first CEO. More disturbing are the cuts imposed by the Congressional committees marking up next year’s budget.

The MCC’s original concept was to award $5 billion annually to low-income countries based on objective criteria measuring their performance in ruling justly, investing in people, and promoting economic freedom. Appropriations for the MCC in its third year of funding, however, appear to be stuck below $2 billion. Criticism of the MCC for getting off to a slow start misses the point. Creating a new agency takes time and the original concept remains valid. To enable the MCC to live up to its potential, its newly nominated CEO will have to sell the MCC vision to a skeptical Congress and gain the flexibility required to avoid drifting toward “more of the same.”


President Bush surprised both critics and supporters of his foreign policies in March 2002—fourteen months after his inauguration and six months after the terrorist attacks on September 11, 2001—when he unveiled his proposal to establish the Millennium Challenge Account (MCA).

The size of Bush’s funding commitment was remarkable; the President proposed funding the MCA at the rate of $5 billion per year within three fiscal years, which represented a 50 percent increase in official development assistance. The MCA vision also offered a bold departure from past aid mechanisms. It promised to focus entirely on poor countries that were implementing sound economic development and poverty reduction strategies, selected on the basis of objective indicators.


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