Millennium Challenge Corporation and the Future of Foreign Aid

Oct 11, 2007
B-354 Rayburn House Office Building


Ambassador John J. Danilovich
Millennium Challenge Corporation

Dr. William Easterly
New York University

Dr. Frederic Sautet
Mercatus Center at George Mason University

Since the end of World War II, western governments have tried, with mixed results, to raise living standards in the third world through a multitude of policy prescriptions including aid grants, capital investment, import substitution, infrastructure loans, and debt forgiveness.

The results are mixed, but many developing countries are poorer today than they were when these projects were launched.  This is because policy makers did not focus on the institutional environment.  Strong legal and economic institutions such as enforceable property rights, an impartial judiciary, contracts, and the rule of law are necessary for entrepreneurs to create sustainable prosperity.

Recently policy makers have launched a new development initiative that seeks to facilitate the creation of these institutions: the Millennium Challenge Corporation (MCC).  By focusing on good governance, economic freedom, and investment in people, the MCC focuses on changing the way foreign aid is awarded and implemented.  Replacing the blank checks of old, the MCC seeks to work with countries to develop indigenous institutions that will foster growth. 

To help policy makers develop a framework in which to analyze the future of foreign aid questions, the Mercatus Center at George Mason University is pleased to partner with the MCC to host an open and honest look at the future of foreign aid.  Participants will be treated to a thoughtful discussion on such questions as:

  • Why is economic growth important? What is the relationship between economic freedom, political freedom, democracy, and the rule of law?
  • Can the MCC avoid the foreign aid traps that have doomed previous assistance programs? 
  • What political institutions stimulate economic growth? Which policies thwart growth?  How does the MCC take this into account?
  • How does the MCC model of foreign assistance address past failures of foreign aid?  Will the MCC be able to overcome the obstacles that have doomed previous aid programs? Why or why not?