Fund the fight against global poverty

The Millennium Challenge Corporation is a critical investment.

There is too much at stake for the United States to allow millions worldwide to continue living in extreme poverty.

Sens. John McCain and Barack Obama both made this clear at the Clinton Global Initiative annual meeting last week.

Alleviating poverty, they said, not only reflects the fundamental values of generosity and caring held by the US and its citizens, but also serves our national interests by striving for security and prosperity for all.

So if the US is serious about alleviating poverty, why has the Senate set the stage for the next president to shut down the first major innovation in US foreign assistance in 50 years?

The Millennium Challenge Corporation (MCC) was globally recognized as a bold innovation in US foreign assistance when it was set up in 2004. Its mission is to reduce global poverty. It promotes sustainable economic growth based on the principle that aid is most effective when it reinforces good governance, economic freedom, and investments in people. The model also recognizes the fact that governments, in developed or developing countries, cannot work with volatile financial flows when planning for the future.

In the middle of the US presidential campaign, the Senate Appropriations Committee has provided only $254 million for the MCC, just 13 percent of the administration's request. This decision fails to take into account the importance of a long-term view of US foreign assistance.

Fully funding the MCC – less than a mere 0.3 percent of the amount being contemplated to bail out the country's financial systems – would demonstrate the pivotal role of the US in addressing a critical systemic weakness in the global economy: the fact that 1.4 billion people live in poverty. As we stand on the precipice of a global financial crisis, the US must reassert leadership in addressing poverty reduction and economic growth in the developing world.

More predictable aid is more effective aid, for the recipient country and for the US taxpayer. Because of this, and the fact that economic growth takes time, the MCC's financing instrument is a multiyear agreement with an eligible country to fund specific projects.

This is not charity; it is wise long-term investment in a safer, healthier, and more prosperous world. And the metric for measuring its success must be in demidecades, not in months or even in years.

The Senate appropriators say they're imposing a temporary pause in the signing of new agreements because they haven't seen tangible results. This logic fails to recognize the difference in time horizons between long-term investments and short-term charity. Perhaps more important, this decision also completely overlooks the "MCC incentive effect" – policy reforms by countries that are either working to meet the criteria to become eligible for MCC assistance or have already been selected and are continuing the reform process.

Anecdotes and early studies on the MCC's effect indicate that transparent and predictable aid, such as the aid provided by MCC, influences reform long before a single dollar of taxpayer money is spent.

In Lesotho, for example, the prospect of MCC funding prompted the government to pass landmark legislation allowing women the right to own property for the first time in that country's history. In El Salvador, the president issued a decree establishing a public service ethics commission that will develop and carry out policies to foster integrity, impartiality, and honesty on the part of public officials.

Hobbling MCC for a year seriously undermines this incentive and casts doubt on the reliability of the US as a partner. Performance-awarded and results-driven assistance is new to US foreign policy and must be given time to succeed.

The MCC is not perfect. Oxfam America found both strengths and shortcomings in MCC's programs in Mozambique and El Salvador. It could be bolder in the projects it finances and more cooperative with other players on the ground; it could give its partner countries more control over their programs. But the issue here is not whether MCC is above reproach, it's whether the Senate has focused on the right issues or looked at the alternatives.

Any congressional evaluation should be part of a broader review of overall US aid aimed at a new national development strategy and a full revision of the 1961 Foreign Assistance Act.

Acting in haste and imposing a temporary pause on MCC, before holding a broader review, deprives the US and its partner developing countries of a valuable instrument and does not bode well for innovation in the American fight against global poverty.

Stephen P. Groff, a former senior official at the MCC, is the deputy director for development cooperation at the Organization for Economic Cooperation and Development in Paris. The views expressed are his own. Raymond C. Offenheiser is president of the international relief and development agency Oxfam America Boston office.

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