CHAPTER 9
The Millennium Challenge Account
The Millennium
Challenge Account was first proposed by President Bush in a speech at the
Inter-American Development Bank on March 14, 2002. The innovative proposal
called for a dramatic change in U.S. bilateral foreign aid programs: additional
funds for foreign aid would go to countries that were following good pro
economic growth policies and rigorous systems of measurable results would be
set up to insure that the funds were used effectively. In particular, the President’s vision called
for more assistance to countries that were (1) governing justly (2) investing
in their people, and (3) encouraging economic freedom.
The Treasury along
with other U.S. agencies—especially State, OMB, CEA, NSC, and USAID—played a
big role in implementing the MCA vision, and, in particular, researching the
objective quantitative indicators of each of the President’s three policy
categories, and then developing good systems to measure results. Treasury’s experience with the multilateral
development banks came in handy and indeed several of the indicators were the
same as those used for our measurable results system, which was part of our
recent reforms at the multilateral development banks. For these reasons the
Secretary of the Treasury was to be vice president of the board of the new
government corporation that was to administer the MCA.
The speeches and
testimony in this section describe the process of choosing and then selling the
quantitative indicators and the MCA more generally. Item 1 was one of the very
first public outreaches to the academic community of the rationale for our plan
to develop quantitative indicators of pro-growth policies in each of the three
performance categories. It was a presentation I gave at the
My Congressional
testimony in Items 2 and 3 describe the actual indicators proposed and the
rationale for them. These testimonies were part of the Administration’s effort
to persuade the Congress to enact the MCA.
The last three
speeches were given after the MCA was passed by Congress. Item 4 was a
presentation in
1. Economic Growth, Poverty
Reduction, and Foreign Aid: The New Agenda,
2. Millennium Challenge Account Economic Rationale, House Committee on International Relations, March 6, 2003 and Senate Committee on Foreign Relations, March 4, 2003
3. Economic Development - Millennium Challenge Account, Subcommittee on Domestic and International Monetary Policy, Trade and Technology of the House Financial Services Committee, June 11, 2003
4. Millennium
Challenge Corporation and the U.S. Role in the Multilateral Development Banks,
5. Launching
the Millennium Challenge Account in Africa, Institute of Economic
Affairs,
6. Economic
Freedom and the Millennium Challenge Account, Cato Institute,
7. Getting
International Economic Development Right: Is Effective Foreign Assistance Possible?,