Articles

No Boondoggle to Tie Foreign Aid to Recipients' Core Values

Monday, September 1, 2003
by Marc J. Lane

Reprint permission from the September 1, 2003 issue of Crain's Chicago Business.

Official corruption, it's plain to see, stifles entrepreneurship, innovation and investment in the poorest of nations. That's one important reason the Bush administration's visionary Millennium Challenge Account plan would, for the first time, promote prosperity in the developing world by tying foreign aid to a country's commitment to rule justly, invest in its people and embrace economic freedom.

Yet, the program's future is in doubt. The ideologues who bash it contend that legislative compromises linking U.S. aid to a nation's social performance threaten to turn the Millennium Challenge Account (MCA) strategy into a worthless boondoggle.

But the MCA proposal is a novel and constructive reform initiative. It promises to bring hope, opportunity and business to the neediest people on earth, but only after their governments demonstrate that their policies and institutions can realistically be expected to spur sustainable economic development.

Under the plan, an eligible country would request a monetary grant, enter into a contract with the U.S. government and submit to U.S. scrutiny. Any country that seeks MCA aid would need to encourage good governance, transparent regulation and open trade. And only measurable results would be rewarded with an incentive payout.

The pending MCA bill would energize the poorest of nations not only by affording them targeted financial assistance, but also by inviting the competition to qualify for it. As important, the program stands to root out official corruption and safeguard human rights and political liberty.

Corruption within developing countries — official bribery, extortion, fraud and embezzlement — debases democracy, distorts markets, and denies both risk-takers and workers their fair share of economic resources. It also undermines the stability and growth of our global trading system.

The MCA concept breaks with the past. Public officials would be held to high conflict-of-interest standards. They would be required to disclose their assets so the potential for illicit enrichment is kept to a minimum.

Whistle-blowers would be protected from reprisals. Prosecutors and judges would be independent. And businesses would be forced to comply with laws banning bribery.

But the bill, which was overwhelmingly passed by the U.S. House of Representatives on July 24, faces resistance in the Senate. Its critics argue that since the MCA doesn't focus solely on economic development, it's doomed to become just another foreign aid failure.

And, truth be told, the legislation will probably be tweaked to foster gender equality, protect the environment and pursue other worthwhile goals.

The futilitarian naysayers are dead wrong to insist that the measure shouldn't do anything but directly stimulate economic development. The better view recognizes that any law must be true to America's core values.

Countries whose development strategies don't draw on the talent and ability of women are less likely to succeed and don't deserve our support. And only countries whose environmental practices are sound can offer investors a robust climate for commerce. Compelling foreign aid recipients to adopt enlightened, pro-growth policies is good politics and good business.

 

 

Marc J. Lane ([email protected]) is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University School of Law.

 


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Copyright © 2003 by Crain Communications Inc.

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