Foreign Aid Goes to Banks, Not Poor

| Wed Mar. 15, 2006 8:48 PM EST

In Rolling Stone this month, Joshua Kurlantzick takes a look at the Bush administration's Millenium Challenge Corporation—which was supposed to revolutionize foreign aid by giving it only to countries that met certain accountability benchmarks—and discover that it's (shockingly) a mess.

The MCC, Kurlantzick discovered, is led by conservative ideologues rather than foreign aid experts, it's too understaffed to dispense all of the $5 billion it's supposed to dispense, and much of the money it does dole out ends up going to help banks and other financial interests overseas rather than to programs that directly aid the poor, like health care and education. It's the foreign aid version of trickle-down economics:

Poor nations are being told, in effect, that projects won't be considered for funding unless they can generate a profit. "Every indication they get from the MCC is that this is about economic growth," says Asma Lateef, senior policy analyst for the aid organization Bread for the World. "You have to yield economic rates of return in three to five years." But for many impoverished nations, such profitability is simply impossible. "In such poor countries, you're not going to be able to guarantee things like economic growth," says Patrick Cronin, a former U.S. AID official who helped create the MCC. "You might lose money [on projects like health and education], but you'll help people. But if you're used to making investments, you may be biased toward that instead." […]

In fact, while the MCC steers aid to business, the president has slashed funding for children's health in the world's poorest countries. "Resources for fragile states in Africa -- such as the Democratic Republic of the Congo, Ethiopia, Liberia and northern Uganda -- have been cut from last year, despite unmet needs they have right now," said Rep. Nita Lowey, who initially supported the MCC. "I find it extraordinary that the MCC model is being touted by the administration as an ideal and successful solution to poverty alleviation."Luckily, the Bush administration seems to be on top of this stuff. The last CEO of the corporation, Paul Applegarth—who was "a Republican campaign contributor with limited experience in foreign aid"—has stepped down. His replacement? John Danilovich. Not a foreign aid expert per se, but he is "a businessman who contributed $20,000 to the Republican National Committee." It's sort of like the Bush administration's version of staying at a Holiday Inn. He should fit in just fine.

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