The Foreign Service Journal, June 2006

available for promoting economic growth in a particular sector (e.g., microfinance, education), for a particular country or region (e.g., Egypt, Jordan, the former Soviet bloc) or for a particular purpose in a particular country (e.g., antinarcotics in the Andes and Afghanistan). The principal reason for this modest support is that funding for economic growth lacks the easily-explainable human dimension offered by HIV/AIDS, basic education, child survival, microfinance or family planning. All these wor- thy purposes have funding levels earmarked by Congress. Economic growth has no earmark, and is therefore a residual category. Worse, Congress typically adds an unfunded mandate or two each year. Since none of the earmarked categories can be cut to carry out the mandate, the economic growth residual is reduced further. The Bush administration tried to rectify the imbalance between immediate alleviation of suffering and an even- tual end to dependence on foreign aid through faster eco- nomic growth by establishing the Millennium Challenge Account. The MCA was intended to reward progress by developing countries that had demonstrated the strongest commitment to three goals: promoting economic free- dom, investing in people and ruling justly. To gauge the worthiness of countries on these three dimensions, its executive agency, the Millennium Challenge Corporation, adopted a set of 16 indicators, all calibrated by other insti- tutions. Many of these indicators address the macro- and microeconomic drivers of economic growth. The indica- tors have been generally approved by outside observers, but the sluggishness in moving from idea to action has caused consternation. The largest problem — the two- year gap between the initial proposal by President Bush and the establishment of a functioning MCC — was caused by the White House and the Congress. In recent months the MCC has picked up speed. It now has signed agreements (“compacts” in MCC jargon) with eight countries, totaling more than $1.7 billion. The compacts approved so far have been heavy on infrastruc- ture (notably roads and ports, with additional smaller amounts allocated for potential users of the infrastructure — farmers, agribusiness firms and others producing for export markets). As a program to mobilize interest in bet- ter policies, and as a vehicle for rewarding countries that offer economic freedom, the MCC has every promise of success. At the same time, it has, and is likely to continue to have, very limited country coverage: its staff is largely based in Washington, with in-country offices focused on implementing the specific terms of the compact. The difficulties in obtaining congressional approval for a goal as abstract as economic growth are evident in com- paring the appropriations for the MCC and for President Bush’s Emergency Plan for AIDS Relief. Each initiative was announced as providing $15 billion during its first four or five years. PEPFAR is ahead of schedule to reach this goal, but the MCC will fall far short. A Key Niche for USAID In the early 1990s, there was a famous meeting (at least in the world of USAID economists) where Deputy Ad- ministrator Carol Lancaster announced that economic growth promotion was a task better left to the World Bank. USAID would concentrate its efforts elsewhere, F O C U S J U N E 2 0 0 6 / F O R E I G N S E R V I C E J O U R N A L 39