The Millenium Challenge Corporation

Back in early fall, my welcome week program went to cool places in DC like the State Department and the Woodrow Wilson Institute. One of these places was the Millenium Challenge Corporation of America, a part of our federal government dedicated to helping the world meet the UN's Millenium Development Goals. The corporation is capable of giving two kinds of grants to countries, based on whether they meet minimum requirements as shown on their scorecards (See, for comparison, Afghanistan, Uganda, and Zambia). This different ways in which the MCC is devoted to cooperation indicate Liberalist leanings. 

The MCC believes in the power of institutions, and expects other individuals and countries to do so as well. It cooperates with the aims of the United Nations. The purpose of the corporation is to help eliminate global poverty. However, they also help achieve all of the Millenium Development Goals on the side, through their indicators. A country must score a green light on more than half of the twenty indicators, and many of the indicators are concerned with whether they are making progress on the development goals. This cooperation with the UN reveals a belief in other institutions on the part of the MCC, as well as a belief in institutions for America, as well. The MCC also believes that “[e]ligibility for an MCC compact is regarded as a seal of approval, signaling to private investors that the country is well-governed and open for business” [MCC Fact Sheet, “MCC’s Continuum of Results”]. To the MCC, an institution can expected to be regarded with respect by an average citizen, company, or country; since often a proponent of a single theory assumes other players in the international game also behave according to that theory, we can take this as evidence that the MCC is Liberalist. Certainly the US and the MCC believe that institutions can help make the world a better place, a variant of neoliberalism, which contends that institutions and international regimes can maintain international peace and order. 

Indeed, the indicators themselves, even ignoring their UN origins, imply a commitment to Liberalism. According to Doyle, Liberalism claims that “all citizens are juridically equal and have equal rights to education, access to a free press, and religious toleration. Second, the legislative assembly of the state possesses only the authority invested in it by the people, whose basic rights it is not permitted to abuse. Third, a key dimension of the liberty of the individual is the right to own property, including productive forces. Fourth, liberalism contends that the most effective system of economic exchange is the one that is largely market driven and not one that is subordinate to bureaucratic regulation and control” [Lamy, 340]. The indicators measure for each of these things. For education, there is are indicators for “Primary Education Expenditure” and “Girls’ Primary Education Completion Rate.” For access to a free press, there is “Freedom of Information.” Abuse of basic rights corresponds to “Political Rights,” “Civil Liberties,” and “Rule of Law,” and the economy section corresponds to “Regulatory Quality” and “Land Rights and Access.”

The corporation is committed to cooperation with the recipient countries in a number of ways as well. The administration prides itself on allowing for independence for the countries involved. An applicant country must first ask for a grant, pass the evaluation (indicators), and come up with a detailed plan of how it will use the money to create sustainable economic solutions to ensure its future economic prosperity and stability. Often this is building infrastructure or training laborers. The plan must be approved by the MCC administration, who have experience in precedents as to what works and what won’t. When the plan is approved, the government is granted financial support and technical/professional support where needed, and while the MCC tracks progress closely, the country’s government is calling the shots as to where the money goes and how the project is completed. The MCC believes that the country itself knows what is best for it, and allows it to have much more free reign than many other financial aid programs. The process is designed for cooperation between the two countries.

In addition, the indicators act as incentives, which is effective and based in cooperation. While such things as trade embargoes are more like ultimatums, these incentives are much gentler and come from a place of understanding. Not all indicators have to be met, only 55%, and the baseline for achieving an indicator may be considered very low to a person in a developed democracy like the US, but are reasonable goals to meet for countries that are very different from ours, having been perhaps not run using Liberalist policies. Once a country accepts a grant, there are two ways it can play out: If they are a Threshold country, they receive a small one-time grant, an award for being “committed to improving policy performance.” If the country subsequently drops lower in the indicators, they simply do not receive another Threshold grant, and are not re-evaluated for some time. If a country meets the indicator standards, they are eligible to receive a “compact,” which is a multi-year agreement to fund the specific plans discussed earlier; these work out like some large scholarships do, giving out smaller amounts of a large total amount of money over a number of years. And similar to the scholarships, if the country drops below a certain performance level while receiving the money, money isn’t paid back like a loan, but stops being supplied. (And they are not re-evaluated for indicator performance for some time.)

In summation, the Millenium Challenge Corporation is a section of the US government that runs on Liberalist principles. Unlike what the critics claim about the practices of the World Bank, the recipient countries of the MCC are intensely involved in the terms of their grants. The levels of reward and requirements for indicators show sympathy and understanding for developing countries, and the grants are structured as incentives rather than demands. The MCC works with the United Nations and believes such institutions to be regarded with respect. The MCC has a mix of classical Liberalist and Neo-Liberalist practices, and thus I simply call it “Liberalist.”