Picking Winners

The Millennium Challenge Accounts

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 for dealing with these states. 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.

In March 2002, the administration proposed a new foreign aid program called the Millennium Challenge Accounts (MCA). 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. 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). This may sound like a reasonable, even enlightened, policy. In practice, however, it means that these new funds will be targeted at the countries that are most likely to succeed without them. 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. The MCA does solve some problems of existing U.S. foreign aid, but it does this by picking winners and ignoring losers.

Solving Problems

The MCA was designed to address a number of criticisms of existing foreign aid programs:

In response to the complaint that U.S. aid is inadequate, it proposes a 50 percent increase. This is all new money, rather than a re-allocation of funds from elsewhere in the foreign aid budget. 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. 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. That honor had been held by Japan until 2001. The change was due, first, to the weakening value of the yen and then to increased U.S. aid connected to the war on terrorism, including a $600 million package given to Pakistan as a reward for its support in Afghanistan.

In response to the complaint that U.S. aid is manipulated for political purposes, MCA country eligibility is to be determined by “objective and quantifiable” criteria, according to the authorizing legislation. Data will be drawn from various publicly a...