The Millennium Challenge Account: Influencing Governance in Developing Countries through Performance-Based Foreign Aid
Stubbs, Rebecca, Vanderbilt Journal of Transnational Law
The United States actively impacts the legal and political environments of developing countries through the Millennium Challenge Account (MCA). This new approach to foreign development aid presents both an incredible opportunity to encourage good governance as well as a serious danger of U.S. political agendas manipulating foreign aid to serve partisan interests. The MCA should seek to develop a nonpartisan strategy and focus primarily on pure rule of law, governance, and political freedom indicators and programming in order to maintain its current successes in improving the legal and policy environment of developing countries competing for MCA funding.
The direction and mandate of the Millennium Challenge Account is important for several reasons. Although some might consider the U.S. position on foreign aid to be a policy issue, much of law encompasses policy and the two simply cannot be divorced. The United States, in organizing U.S. foreign aid around specific indicators of what it considers "good governance," is necessarily impacting both the political and legal environments of developing countries seeking results-based foreign aid. Preliminary studies have documented the tangible impact of the MCA through the "MCA Effect." Developing countries are changing domestic laws and policies specifically in order to qualify for MCA funding. MCA funding disbursements, or "Compacts," are also directly influencing governance and the rule of law through various programming mandates.
As this paper will demonstrate, it is vital that the MCA develop a non-partisan approach to assessing countries and allocating foreign aid in order to maintain fair and consistent relationships with MCA countries. Past experience has demonstrated a tendency to use foreign aid for purposes of political expediency--such as rewarding political allies or shoring up failed states--rather than for purely development or poverty alleviation purposes. However, because the MCA has been designed to reward good governance regardless of U.S. interests, it is vital to maintain the separation between political expediency and the development purposes of the MCA. This can best be achieved by cultivating a more direct focus on governance reform and the rule of law, both in determining aid eligibility and in disbursing funds for development initiatives.
TABLE OF CONTENTS I. THE MILLENNIUM CHALLENGE ACT: RETHINKING U.S. FOREIGN AID II. THE HISTORY OF U.S. FOREIGN AID: DISAPPOINTING RESULTS AND NEW APPROACHES A. Research and International Consensus B. Altruism, Obligation, and the "Moral Imperative" in the United States C. National Security D. Failure of Previous Foreign Aid Vehicle and the Birth of MCA III. ANALYZING THE MCA CONCEPT A. The Conceptual Model of the MCA 1. Indicators and Country Selection 2. Funding Allocations--Compact Development and Threshold Programs B. Analyzing the MCA Concept Through a Partisan Framework 1. Indicators and Aid Selectivity a. Economic Freedom b. Investing in People c. Ruling Justly 2. The Partisanship of Compact Selection IV. CHALLENGES, AND THE NEED FOR REFORM A. Empirical and Anecdotal Successes Achieved by the MCA 1. The MCA Effect 2. MCA Compacts and Funding Allocations a. MCA Compacts b. Threshold Agreements B. Challenges Ahead: The Danger of Partisanship 1. Eligibility Indicators 2. Partisanship in Funding Allocations a. Board Discretion b. MCA Compacts C. Impact of a Partisan Foreign Aid Vehicle V. SOLUTION: DEVELOPING AN APOLITICAL ENTITY WITH A FOCUS ON GOVERNANCE AND THE RULE OF LAW A. Create an Apolitical Organization 1. A Model for Reform--Lessons from the World Bank 2. …