Development and Cooperation


	Viewpoint The new US development aid: no panacea against inefficiency		The new US development aid: no panacea against inefficiency The US government plans to increase its development aid by five billion dollars a year through to 2006. This extra money, from what is known as the Millennium Challenge Account, will be made available only to developing countries which make outstanding progress, judged on the basis of 16 criteria from combating corruption to reasonable investment in education and health, to the pursuit of liberal economic policies. These funds shall not be managed by USAID but by an organisation yet to be established, the Millennium Challenge Corporation (MCC). Supporters praise the proposal as a decisive step towards more efficient development aid. Are they right? The proposal of the US administration is a welcome one from all those who care about development and poverty reduction. But it is much too early to break out the champagne. Both the presumptions behind this proposal and the politics of realizing it urge caution. It may not be fully realized anytime soon and if it is, it may not fully realize the expectations set out for it. First is the politics of the Millennium Challenge Account (MCA) and MCC. There are two major political problems in realizing what the President proposed. Number one – the US appears likely to occupy Iraq and may also find itself preoccupied with North Korea and the continuing war on terrorism over the coming year, to name just a few of the major foreign policy problems facing it. These high priority problems will demand the continuing attention of the President, his senior aides and members of Congress. The time and effort it typically takes to get a piece of new legislation out of Congress in a form the administration will accept can be enormous. US political leaders will simply not have the time to put into creating an MCC and making sure it is set up in the way they wish. Something may come out of Congress but it seems likely not to involve a new government agency: members of Congress dislike creating new bureaucracies, especially those involved with such unpopular activities as foreign aid. If there is new aid money, it is most likely to end up in USAID or the Department of State, both of which are dying to get the new monies in any case. A second political issue relates to the yawning budgetary deficit facing the US government. The budget deficits will become issues in the 2004 presidential election and politicians know it. Many of them are unlikely to want to vote additional spending for relatively low priority programs for that reason alone. The Congress dislikes creating new bureaucracies It seems very likely that some of the promised MCA monies will get through Congress but not anything near what the President promised. His administration did not even request the full promised amount for fiscal year 2004, now under consideration in Congress – a sure sign of anticipated problems. A third political issue involves the use of whatever new aid monies are appropriated. The US, with its global geostrategic focus and its military engagements in Afghanistan, Iraq, Colombia, the Philippines and elsewhere needs allies – usually neighboring countries to support its diplomacy and help provide for the needs of its military. The US already promised Turkey $6 billion in aid for the use of its bases in the war in Iraq. It has provided generous aid to Pakistan over the past two years (in contrast to the period before that when US aid was virtually cut off because of PakistanÕs poor economic and political records), to Uzbekistan, and to numerous other countries – not to mention the likely demands for more aid from Israel and Egypt as part of the USÕs Middle East diplomacy. Because these needs for aid are associated with war and peace and in some cases, US security, they will take precedence over other uses of aid, such as promoting development in countries that perform well but are of little strategic importance to Washington. Support for allies takes precedence over development aid This a fact of life of a great power. It will make providing significant additional funds for MCA countries a very difficult sell in Congress and, ultimately, with the administration itself. The administration will not show its hand on this issue until it has to but eventually it will have to have the monies related to its diplomacy and they will take precedence over other forms of aid. These are the political problems associated with an Millennium Challenge Account and the Millennium Challenge Corporation. What about the substantive problems? There are three major substantive problems with the new proposal and they are important. First, which countries will qualify for the aid? The administration is proposing an extraordinarily complicated set of 16 different quantitative criteria to evaluate eligibility. Countries have to exceed the median on a certain number of these criteria to receive MCA monies. Development aid is very much experimental This in itself invites confusion and controversy at best and derision at worst. The problem is not only complexity. The data on which eligibility is decided are often incomplete and unreliable. It is very likely that this exercise in false precision will collapse of its own weight and another approach will have to be developed. Second, the assumption that foreign aid will be more effective if only countries fit the criteria for the MCA may also be an exercise in delusion. MCA planners want results – quantifiable measurements of effectiveness in a relatively short period. Meaningful development results are seldom visible in two or three short years and the problems of aid effectiveness cannot all be attributed to poor governance, absence of free markets and lack of health and education investments. They can also derive from failures on the part of aid donors, mistakes on the part of recipients and unexpected external shocks (like an increase of oil prices). There has to be a tolerance for failure anytime governments attempted to bring about beneficial changes in foreign countries. Aid for development is very much experimental and there will be failures – probably many – even in the best of circumstances. There seems to be euphoria among aids former critics in Washington that if only the MCA criteria are met, aid will henceforth be effective. The first time this proves not to be the case, there may be a major backlash against aid by those who have set it up to be highly effective if only its done in a new way. In this context, there is another naive a spect of the MCA experiment: the new MCA is set to have a staff of just 100 to handle an eventual program of $5 billion. And much of this $5 billion is likely to be provided in relatively small amounts to a variety of public and private organizations in recipient countries. It may simply not be possible to manage that much aid effectively with so few people. The advocates of the new approach expect too much All of these critiques do not mean that the MCA is a poor idea. Quite the contrary – it is past time that the US became more generous with its foreign aid, directed it to countries where there is a probability it will be used well and provided it in new ways that put greater responsibility for its design and implementation on recipients. But it is also a mistake to see this approach as a silver bullet – a way of ensuring much greater developmental effectiveness in a short time. The development business remains experimental, full of surprises and challenges. Failures, under the best of circumstances, will still occur and successes may not be evident for years. The advocates of the MCA appear to be falling into the trap – familiar in the past in the US – of overselling what the MCA can do and how quickly it can do it. Experience suggests that we be more modest in our hopes and expectations but continue to try to realize them. Perhaps we can put the champagne on ice but it is still much too soon to break open the bottle. By Carol Lancaster Carol Lancaster is a Professor for International Relations at Georgetown University, Washington. From 1993 to 1996 she was Deputy Administrator at the US Agency for International Development (USAID). lancastc@georgetown.edu