The Millennium Challenge Corporation at 20: Progress and Prospects

Panelists will reflect on the past, present, and future of the Millennium Challenge Corporation (MCC) as it reaches its twentieth anniversary of operation, as well as the future of economic diplomacy and the challenging landscape of global poverty.

This meeting series is presented by RealEcon: Reimagining American Economic Leadership, a CFR initiative of the Maurice R. Greenberg Center for Geoeconomic Studies. 

GOODMAN: Well, good morning. Welcome to the Council on Foreign Relations.

My name is Matt Goodman. I direct a project here called RealEcon, or Reimagining American Economic Leadership. We’re trying to have a conversation about America’s role in the international economy, why that matters to American interests, to American people, and to try to nudge us back towards something like a—closer to a consensus on how the U.S. should engage in the world, which is a multiyear multi-faceted project. So stay with us.

But we’re delighted because one of the strands of our work is on, you know, broadly writ development policy and how the U.S. engages in the world through that set of policy tools, and one of those very important tools is the Millennium Challenge Corporation which we’re going to hear about today, which is celebrating its twentieth anniversary this year.

So we’re going to sort of look back a little bit, look at the present and the future a little bit more and understand, I hope. Certainly, from my point of view I’m trying to understand more why this important organization still matters to American involvement in the world and why it matters to Americans, actually, at the end of the day. This is something that I think we want to try to get to.

So we could not have a better group of panelists here today.

Alice Albright, to my immediate left, is the chief executive officer of Millennium Challenge Corporation. She’s a CFR member, importantly, and has done many other important jobs in Washington, at the Ex-Im Bank, at the GAVI Fund, and in the private sector. She’s been a leader as well, and she doesn’t even remember this, I think, but we were in elementary school together a hundred years ago. So I’ve known Alice for a long time, and so we’re delighted to have you with us, Alice. Thank you for joining us.

By the way, full bios are in your packet so I’m not going to go through every detail, but you’re welcome to look through that.

Next to her is Ambassador Lynn Raymond Young, who is the ambassador of Belize to the United States. He’s been here since 2021 and before that was a chief executive of an electricity company, a subject that is going to come up today, and Belize is a new MCC compact country as of two weeks ago, three weeks ago, something like that.

YOUNG: Yeah. Ten days ago.

GOODMAN: Ten days ago. OK. Even less. September 5. OK. They are a compact country. You’re going to learn what a MCC compact country is in a second. But we’re delighted to have Ambassador Young with us. Thank you, sir.

YOUNG: Thank you.

GOODMAN: And then at the—to my far left in only a geographic sense is—(laughter)—Gary Edson, who is a lot of things but he’s currently the president of More Perfect and former deputy national security advisor and deputy economic advisor to President George W. Bush. In that capacity was for a couple of years my boss. And so Gary was in the next room. I was not involved with the creation of MCC but he was. He was the leader of that effort to create this institution twenty years ago and so Gary can give you the origin story. He was also—he also co-led the development of PEPFAR, another important initiative that we’re going to talk about in the RealEcon initiative over time—the President’s Emergency Plan for AIDS Relief. And so we might touch briefly on that but we’ll have a separate event on that at some point.

OK. I’ve said too much. Let me turn to Alice, and why does twenty years matter for the MCC and tell us a little about MCC before we dive into the specifics.

ALBRIGHT: Well, Matt, thank you, and it’s a great pleasure to be here with all of you. I see lots of friends. Speaking about elementary school I see Esther. We go back to third grade. Mrs. Hills as well. So it’s just wonderful to be here.

So just to give you a little bit of an overview about MCC in twenty years, so we were created twenty years ago, thanks to Gary and President Bush, and at the time it was really an experiment. It was a very—designed to be a very different way of doing international development. Long-term grants—grants, not debt—very selective process, very focused on pure economic development, and helping countries really overcome their key challenges to economic growth.

We are celebrating our twentieth birthday year and we’re spending a lot of time looking backwards at what went well, what needs to be changed, but also looking forward. Over the twenty years we have amassed an unbelievable track record with—and being very disciplined about executing our business model.

So we have invested just under $17 billion in forty-seven countries, six continents, with eighty—we have two types of programs, a big one and a little one, compacts and thresholds. We also have regional. Eighty programs, and all of them in one way or another have generated real value added for their countries and it is pure economic development to alleviate poverty. That’s really the point.

So there’s two questions that are really on our mind at the moment. One is why does this matter now for the U.S. and for our country partners, although I humbly don’t want to answer for our country partners.

The answer is that the countries are facing some real challenges and we are a very good tool for helping countries overcome those challenges, although there are many tools and we can talk about that. But for the U.S. it’s about stability, security, and opportunity and we need to do a better and better job of making that case domestically.

Now, going forward, we continue to evolve—we can talk about that more—but we are going to be a critical—we are a critical tool in the U.S. government’s toolkit and in their international development strategy. And then later today—today’s a busy day—the White House will be releasing its new international development strategy and it will be talking about what are the main—I don’t want to steal their thunder but it will be talking about their main priorities and one of them is really focusing on helping countries in a very systems based way overcome the vulnerabilities that they’re facing now.

So we are going to continue to evolve to meet the moment. We’re very good at adapting and I’m very optimistic about the role that we can continue to play, going forward. We do have some challenges and one of them—and I’ll keep coming back to it as many times as I can—is money.

We need to put more money into international development in general and MCC has, dare I say it, never reached the level of funding that was originally conceived of, and I will let Gary talk about that. But we can do more with more and we’re going to continue to make that case.

GOODMAN: Great. All right. Well, there’s a lot to follow up on there and I will come back to you, and I will skip to Gary because of his role in the history of this.

So, Gary, tell us about that origin story. Why did we need an MCC?

EDSON: Thank you for that question, Matt.

Let me first say, though, what a thrill it is to see MCC so ably led with such vigor and vision and let me congratulate the government of Belize on the new compact.

You may not realize it but you are the latest beneficiary of an effort that President Bush began over twenty years ago to radically transform the way in which aid was conceived, used, and delivered, and I think that two things drove that effort.

First was the president’s belief that a world in which half the population suffers from disease and poverty is neither just nor stable, so we had a moral and a national security imperative to act.

The second was the perception that aid just wasn’t working. Remember—and you got to cast your mind way back here—this was 2001, 2002. Aid was based upon the old donor recipient, really donor-victim paradigm, which was paternalistic, bred dependency, flew in the face of human dignity, and the entire discussion about aid at those times was about how much were we going to spend. It was about inputs, not outcomes—what results did we want to achieve and how can we do that most cost effectively.

What began to emerge, though, was a body of research which seemed to show that aid was more effective in good policy environments, and at the time I had the ignominious fate of being the G-7 sherpa. Actually, that year it formally became the G-8. Amazing to remember now that Putin was at that table.

And in one sherpa meeting I advocated for conditioning increased aid on countries that were combating corruption, improving health and education, creating economic opportunity, and the French sherpa almost fell off his chair. Mon dieu, he said—what are we going to do about the Francophone countries? And the U.K. sherpa said, what about East Africa. And the Italian, the Horn of Africa?

And it became clear that they felt straitjacketed. They felt constrained by their colonial baggage. But as President Bush famously said to French President Jacques Chirac at that summit, that’s your burden, not ours.

So we were free to construct an initiative that would competitively select countries for increased assistance based upon a set of transparent, rigorous, publicly available criteria with the sole objective of promoting economic growth, and the banging and shouting that Matt heard was me quietly consulting a few colleagues, pressure testing the concept, and then meeting with OMB to carve out a new line item that would be free of the earmarks that hobbled and, to a large extent, still hobble USAID.

So in March of 2002 at a speech at the Inter-American Development Bank with Bono behind him the president announced the Millennium Challenge Corporation calling for, quote, “a new compact,” where the name comes from—a new compact for development between rich and poor nations based upon true partnership, country ownership, and shared accountability for results.

And those were exactly the same principles on which we based PEPFAR ten months later. What the president was effectively saying and what MCC does is we’ll give more if you do more in three key areas: governing justly, investing in health and education, and promoting economic freedom.

And as Alice said, since then MCC has lifted, roughly—helped lift, roughly, 400 million people out of poverty. But what makes the story interesting is that while MCC, yes, has not received the level of funding we originally envisioned it’s nonetheless had an outsized impact because of three things that happened after that announcement.

First, we succeeded in embedding those principles and that same paradigm in the landmark U.N.-Monterrey Consensus on Financing for Development, which in successive iterations has underpinned global development thinking for twenty years now.

Second, we embedded those same principles in the 2002 National Security Strategy which called for an ever increasing circle of development, and that raised global development for the first time to be a central pillar of U.S. foreign policy and national security and it marked, to my mind, the first formal expression of what became known as smart power—the integration of soft power and hard power into a coherent strategy that, frankly, in typical Bush fashion was big hearted and hard headed.

Finally, MCC successfully disrupted the aid industry. It broke the traditional development mold by providing aid through countries, as Condi Rice said in her book on democracy, not around them.

Its then revolutionary approach—partnership, ownership, transparency, data-driven decision making—has now become widely accepted around the globe, albeit tends to be more preached than practiced, which means that MCC remains the model not for much maligned, and deservedly so, nation building but for much needed nation enabling, transitioning countries from aid-driven development to sustainable private sector-driven growth.

GOODMAN: OK. There’s a lot more to that story but I hope that gives you a sense, and I learned a few things that I didn’t know there and we can come back to that.

I do want to bring Ambassador Young in but, Alice, is there anything about the sort of history and anything that Gary said that you want to add to or subtract from?

ALBRIGHT: I certainly wouldn’t subtract but I think, Gary, you framed it all very, very well and what’s—just one quick point, which is a lot of what you have said about what the original concept was is still in practice, and so it has lasted. It’s shown the test of time.

You know, we tweak this and a tweak of that but the basic concepts of countries that are wanting to be and trying to be on the right path have lasted. Long-term economic development is very much the focus and transparency, accountability. I don’t know if—who’s in the room has looked at our website and looked at our scorecards but we score every country every year and it all goes on the website.

So much of what you’ve said, the core bones of the place have not changed and, I think, much to the credit of the agency.

GOODMAN: Super.

Ambassador Young, tell us, from your perspective, what an MCC compact means for Belize. Why did you want this and what do you think it’s going to do to change—what has it done already to change Belize?

YOUNG: (Laughs.) Well, thank you very much for this opportunity.

The MCC compact, it’s been a tremendous opportunity for Belize, one that we—actually we didn’t expect. We didn’t know about the compact until, you know, we were invited—I was invited to a meeting and it was explained to us, and right off the bat I can say, you know, I walked out remembering the words of one of my mentors—if you do the right thing for the right reasons good things happen, and this approach is exactly that, right?

So for us, you know, we’ve been—and I say this for a lot of people in Central America and the Caribbean, that we feel that we’ve done all the right things. You know, we are strong democracies. We try to be good at human rights and governance and try to tackle corruption, but sometimes we feel overwhelmed and we feel that we are not making progress.

And so sometimes you see in some of these countries people are beginning to ask, well, you know, is there another way because people are still poor and the crime is still accelerating. So when something like this comes along it’s, like, wow, you know, what it’s going to do for Belize.

And I was explaining earlier that when we first heard about the project, when we started learning about it, and we were told it’s going to take, like, two years, just the process of getting to where we are, where on the 5th of September we signed the compact. We were thinking: Two years, wow. (Laughs.)

But having gone through the process, we realize the process itself is going to help our country even—as much as the compact itself because the approach of trying to understand the constraints to economic development there is more than just the two areas that we’re looking at, right?

There are other issues that maybe are not as—equally important but we can tackle on our own and the entire process of understanding our constraints has helped us now to see, hey, taxation, you know, regulatory policy, access to finance—these are things that our government is already beginning to tackle.

So it’s been tremendous just from that point of view. But understanding now the two main issues, education and energy, that we’re attacking it’s going to be tremendous for us.

You see, one of the things I personally realize is that things like education in countries like Belize where there are limited resources politicians are under pressure to get reelected and this kind of project—we are not going to see the benefits of this project until the next generation, really.

You know, when you focus on education you’re talking about the next generation of Belizeans that are going to come up and they’re going to be educated and armed with the skills to take the country forward.

But that’s not going to help this government in the next election. So you find that there’s a challenge within these countries to put money into these long-term projects that will make a long-term difference, and having an external body like MCC, a grant, and also put in that discipline because the process and the approach, as you mentioned, right, of doing the right things, doing it right.

Having an external body is so important. You know, all of us, right, even in our own personal finances—you know, when you go to borrow money from the bank the discipline that the bank puts down on you for your business helps you really to make sure that it’s successful.

So, again, from that point of view I think it’s just tremendous. You know, Gary, you spoke about the previous approach to aid and that, you know, from my own personal little ecosphere I’m here because of USAID. I got a scholarship to do my engineering degree through USAID, and then I got a scholarship to do an MBA through Canadian aid. So I can’t say that it didn’t work on a personal level, right? (Laughter.)

But I understand what you’re saying, because, again, in the region there’s sometimes a feeling that the U.S. puts aid into countries that are not really well run—you know, they’re dictators. That’s in the past, too. And sometimes we look at it and say, good grief, you know, why is this country is 25 billion (dollars) here, 25 million (dollars) here, and we are doing the right things. We are—we are, like, the good kid in the classroom that gets no attention, right? (Laughter.)

So it’s—from our point of view, it’s been tremendous. And again, it’s going to be transformative. I really do believe it’s going to be transformative. Like I said, what we are focusing on, people.

Because, again, I come from the private sector. I was the CEO for an electric company and that was exactly my approach, right? One of the first things I did was to focus on training people, making sure they have the skills, because my concept was that if we can get everybody in the company to be the best that they can be they themselves will—it’s not a top down affair. They come up with great ideas for the company to move forward.

I think the same thing is going to happen in Belize and it’s happened to a certain extent because, like I said, a lot of us in Belize in leadership positions now got an opportunity through U.S. aid or Canadian aid to get our education and that education is what helped us to move the country forward.

So can you imagine we have, what, 20 percent of our kids getting a tertiary education at this point in time. If—and the quality of the education has slipped a lot. If this project changes that to the point where we have the majority of our kids getting a good quality education they themselves will move our country forward in the direction we need to move it.

So it is just a tremendous opportunity. I want to thank you for selecting us, and I must say before I came to the United States, and I guess you guys know it, sometimes there’s a—the view of the United States is not always the best in countries and that’s no fault of the United States. That happens when you’re number one. You know, you attract criticisms, right?

But being here now and seeing this approach I realize that—I’m full of admiration because I realize that the United States is, despite whatever issues—we all have issues—it’s trying to do the right thing and we are happy to be a beneficiary of that.

GOODMAN: Great. Well, we didn’t plant that. That was a very eloquent statement there. Thank you, Mr. Ambassador.

I’m going to bring the audience in in a few minutes and so if you have questions start thinking about them. By the way, this session, I didn’t say, is on the record. We are actually recording this and we’re going to put it on our RealEcon and CFR platform. So bear that in mind as you ask questions.

Alice, let’s look forward a little bit. What are your biggest—you’ve touched a little bit on some of this. What are your biggest priorities? What are you hoping to do over the next twenty years?

ALBRIGHT: So the question that is really on our mind is how do we adapt and how do we prepare ourselves for what, dare I say, that the next twenty years will bring.

So we touched earlier on the things about our model that will not change, you know—(inaudible)—activity, our commitment to data, the fact that we’re a long-term grant provider, that we focus on economic development.

But there are some things that we continue to study and look at. One is do we have the right kind of grant instruments. One of the things we’ve introduced recently is a regional grant that works with several countries at a time where the idea is to encourage regional integration and trade, and we’re already in sort of version two and version three of that. So that’s going to continue to, I think, give us a lot of potential.

Recently we introduced being able to do a smaller program called threshold after we would do a compact. So initially we couldn’t do that. The idea was you do compact—you start with a threshold, you do the compact—the big program—and then it’s game over.

But we can now go back to thresholds and the benefit of that is being able to work with countries with whom we want to restart the relationship. So just recently we selected this past December the Philippines and Tanzania specifically for that purpose.

The other thing that’s really on our mind at the moment is expanding our geographic footprint. Right now we can work with what’s defined by the World Bank as low income and lower middle income countries. Right now that’s about seventy-four countries.

When MCC was created that number using those same categories were about—were over a hundred countries. So a number of countries have gotten, as I say, a touch richer on paper but in practice not really when you look at where there are pockets of poverty and you look at the degree of inequity that exists in those countries.

So we have a piece of legislation on the Hill and we’re at it and at it and at it to try to get it passed—we’re making good progress—that would add another thirty countries to our footprint, which would be really powerful.

And I brought one of my favorite little booklets—we’re good at little booklets. It may be hard to see. It’s going to show you what this is going to do for MCC. So right now we’re only doing one program in the Western Hemisphere, Belize.

OK. We’re only doing one in Eastern Europe. It’s Kosovo and that’s it, and that’s because of these income restrictions.

But if we get the bill passed we can do—and this is where it’s hard to read—we’re going to add another handful in Latin America and Central America, we’re going to add a big handful in Eastern Europe, and we’re going to continue to build on what we’re doing in the Pacific and in particular in the islands, which are obviously of strategic importance to us right now.

So in addition to enable us to continue to work on poverty where it exists now we’ll add a tremendous geographic and strategic focus for MCC over and above all the wonderful work that we’re doing on the continent right now.

So that’s really what our future is going to be all about is deploying the tools that we have across, we hope, a greater geography and I think it will be beneficial both in terms of poverty reduction opportunities, working closely with our partners, but also getting the U.S. out there in different parts of the world where for all the reasons we’re all familiar with it is so vital right now.

GOODMAN: Great. Super.

What do you think, Gary? Is that sort of consistent with the vision you had twenty years ago for this? Are those—is that the right direction for MCC to be headed?

EDSON: Well, it’s definitely the right direction.

Let me just say, though, that as thrilled as I am that we’re here celebrating MCC’s twentieth anniversary let’s be clear. MCC shouldn’t exist twenty years from now. The business of MCC is to put itself out of business—eradicate poverty, close the doors, and throw away the keys—and in order to do that what we need to do, as Bono once said to me, is put MCC on steroids.

GOODMAN: By the way, this is the second time he’s mentioned Bono. He was unavailable to join us today—(laughter)—but we’re glad that Gary is here to channel him. Right.

EDSON: And I’m going to channel him in a couple of ways shortly. At a time when democracy is under threat MCC rewards good governance. At a time when aid budgets are under pressure and budgets generally are under pressure, MCC gets double the bang for the development buck.

You get accelerated change in the countries that have earned it, like Belize, and you incentivize change in countries that are seeking to qualify for it, and in a time of heightened great power competition MCC, together with PEPFAR, sits at the point of the smart power spear, particularly in confronting China’s efforts to translate its extractive Belt and Road Initiative into geopolitical gain.

And let’s be very clear about this. China is now Africa’s largest lender. It has helped burden the continent with unsustainable debt. Nine hundred million people—900 million people—now live in countries that spend more on interest payments than on health and education combined.

That’s not just a tragedy, that’s a crisis, and MCC with its country-driven grant-driven model stands in stark and attractive contrast. So how do we capitalize on that?

We do four things. First and foremost, what Alice was talking about. Expand MCC’s reach by expanding the country eligibility standards so that we can focus on countries that still have large concentrations of poverty but also in which we have significant strategic interests, and she outlined where those countries are around the world.

Second, I’d argue we ought to hit them where they ain’t. If China’s debt is building roads let MCC’s grants lift up the people and the businesses that are using those roads. So in addition to continuing to invest in physical capital—ports, roads, power—MCC should also increase its investments in human capital—education and health—like it’s doing in Belize.

And MCC should also invest in digital public infrastructure, data sharing systems, payment systems, systems that will accelerate innovation by connecting people to people and businesses to information and markets.

Third, I’d argue—and I think I’m the only one here who can make that argument—I would transfer the 1 (billion dollars) to $2 billion that USAID spends each year on economic growth programs to MCC where MCC’s rigorous cost benefit approach will ensure positive economic rate of return on those dollars and I’d work also more closely with the Development Finance Corporation to magnify the impact by increasing scale and impact.

And, finally, I think Congress needs to increase MCC funding overall so that we can do more compacts and larger compacts. Alice mentioned regional compacts, national compacts, subnational, and urban compacts. All those measures taken together will not only lift more people out of poverty but they’ll also promote peace and prosperity by doing what America does best, lead.

And in my experience nothing of significance happens in global development without U.S. leadership. You know, as President Bush said when he announced the Millennium Challenge Corporation, for moral and for national security reasons we cannot leave half of humanity behind while we seek a better future for ourselves.

There are no second class citizens in the human race and expanding MCC’s reach to these new countries makes good on that promise.

GOODMAN: OK. Great. And thanks for the point about American leadership, which I see this as very central to as well and that’s why I wanted to do this event and get such a great group together.

Ambassador Young, can I just ask a quick question about China since Gary raised it?

YOUNG: Sure.

GOODMAN: And it’s sort of inevitable in any conversation in Washington that it comes up.

I mean, presumably China is making offers to Belize and your neighbors as well. How does this stack up? I mean, what is China’s offering that—because a lot of countries are taking that offer from China.

YOUNG: Yeah. Yeah. Yeah. We’re well aware of that. And within the CARICOM—you know, we’re a member of CARICOM and SICA. There’s a lot of pressure on the countries to accept the assistance from China.

We have not. And one of the main drivers for us has been the situation with us with—the situation that Taiwan has with China mirrors, to a large extent, what we feel we have with our neighbor Guatemala that has claimed our country.

And so we stand up very strongly for countries that—you know, self-determination—their right to self-determination, which is why we support Taiwan unrestrainedly and likewise the Maldives—you know, all those situations.

So we will never—for us, as a matter of principle as long as Taiwan wants our support we will be supporting Taiwan. But when it comes to the actual financing part I’ll be honest, I think if it wasn’t for that the Belize government probably—one of our governments would have accepted aid from—and because at the end of the day—

GOODMAN: Because the money is cheap and available.

YOUNG: Yeah, it’s cheap, it’s available, and the political pressures of delivering for countries that don’t have a lot of resources it’s tremendous. It’s tremendous, and you cannot discount, you know, building a brand new stadium and putting in a brand new road one year before elections.

That’s a tremendous thing and that’s why, like I said, I so much myself personally appreciate the MCC approach because it’s not about doing things at least the politicians can’t use it to win an election. It’s about long-term development of the country which is needed, and they know it’s needed but, you know, you get caught in situations where they want to get reelected and I suppose that happens in every country, in every democracy and that’s, I suppose—I’m not a social scientist. I’m just an engineer. But I suppose that’s one of the big challenges with the democratic process, right, that sometimes the focus is on the next election as opposed to the long-term development of the country.

GOODMAN: Great. I have a thousand more questions but I want to give the audience a chance to ask questions. So we’re going to have microphones going around. If you have a question please raise your hand. Just identify yourself quickly.

And there’s a lady there in the middle table, if we could start there. Thank you.

Q: Hi. Thank you so much to the panel. Faheen Allibhoy at JP Morgan.

My question, as you look forward, Alice, relates to something that I think Gary mentioned, which is kind of one of the objectives with all kind of policies to have sustainable private sector-led growth.

So would you speak a little bit more about is MCC thinking about what instruments it could have where it could partner with the private sector? Blended finance is, obviously, a big theme that, you know, the private sector has been engaging with different development banks on and so I’d love to get your thoughts on is that part of the twenty-year horizon.

GOODMAN: Really good question because, you know, a lot of people say China’s got all this money. It’s going to spend a trillion dollars or 50 billion (dollars) in Africa or whatever. But we got a lot more money if we can get the private sector crowded in to these efforts—the MCC, the Partnership for Global Infrastructure. So the private sector dimension is really interesting here.

How would you answer that question?

ALBRIGHT: It’s a great question. Hi, Faheen. Nice to see you.

So a couple thoughts on the private sector. I mean, it’s absolutely critical to crowd in the private sector. We do it in two ways.

One is—I call it we sort of set the table and that often—and we’re doing this in Belize and a number of places elsewhere—as we look at the regulatory environment in whatever sector we might be working on and see where some of the barriers might be to actually having the private—you know, private sector corporates find those areas investable and attractive and how can we begin to help a government begin to make adjustments regulatorily.

We also do work on blended finance. Shortly, later today, we’ll be taking to our board a $458 million program in Zambia which will principally focus on agriculture but there’s a part of it that is specifically oriented to helping local Zambian financial institutions figure out changes to their risk appetite to provide more asset-based lending to small farmers, and we’re getting involved in that to help—look at some of the subsidies and the risk, not—subsidies is the wrong word but sort of some of the credit guarantee aspects of that.

We also are about to start a big program in Indonesia where—it’s a big, complicated program, $649 million and the Indonesian government’s putting in $49 million, and there’s going to be a window that is working specifically with Indonesian banks to provide more capital to small businesses and women-owned small businesses.

So in both of those cases they’re examples of where we can use our capital to help banks get more comfortable with certain types of credit exposure in their countries. So it’s a form of blended finance. But we’d be happy to talk to you guys, going forward, about what we can do.

I also—while I have the floor I want to congratulate the government of Belize for their own contribution alongside of our $125 million. In almost every case—the rules are slightly different depending on what country you’re talking about—we ask governments to put their own money into compact alongside of ours and it’s a tremendous way of continuing to partner and focus on the priorities.

So thank you, government of Belize, for joining us.

YOUNG: Thank you.

GOODMAN: Great. I think I saw a gentleman there. Yeah.

Q: Thank you. Larry Garber, adjunct faculty at GW, formerly with USAID.

I’m curious, particularly Gary but also welcome Alice’s comments on this—when you were conceiving of MCC back in the early 2000s what was the conception for the traditional aid? I mean, was it to disappear? Was it to take only those countries where MCC could not work because they did not meet the compact criteria?

What was—you know, what was then going to be the role for traditional aid and should it also be applying some of the criteria?

And then was there a vision when, again, this was conceptualized and created of graduating MCC? You talked about working—an organization, agency, working its way out of business. What was your time frame for MCC working its way out of business?

You now said you hope it’s not there in twenty years but isn’t sort of inevitability of the way government, particularly in Washington, works that once you create something it does create new agendas for itself and keep going on?

So was there a sense that MCC would graduate itself at some point?

EDSON: Let me take the second question first.

You are right—horribly right, I might say—about the inertia in the system in government, right. You know, Alice and I were talking. I ran the Clinton-Bush Haiti fund, and Haiti is known as the Republic of NGOs, and I remember sitting in a room and, you know, we had this fund of money, right, so all these NGOs would come to us and say, we’ve been in Haiti for thirteen years—we’ve been working in Haiti for thirty years. And I’d look at them and go, what have you been doing? You’re proud of that, that you’ve been there for thirty years?

There was no conception of a timeline in particular because, let’s be clear about something, MCC is catalytic in a variety of ways and I’m really thrilled to hear the ambassador say it’s not just the money, it’s the process that is making a difference, helping us focus on constraints to growth.

The way MCC disburses its money in country through what’s called the Accountable Body, an entity that’s comprised within the country of government, private sector, and civil society. It’s sort of grassroots democracy at its best, in a way.

USAID talks about localization. There’s nothing more local than the MCC Accountable Body in country. So MCC was meant to be catalytic. We had no particular time horizon and the reason that we’re—that Alice is pushing so hard to expand country eligibility is that there are exogenous factors at work here too, right?

I mean, countries gradually—commodity prices go up or something and a country suddenly is over a certain threshold we had initially set but there’s still huge concentrations of poverty. So that’s business for MCC.

All I know is that we ought to at least imagine a world twenty years from now where we don’t need an MCC because we have reduced poverty globally to such an extent.

In terms of what the vision was for USAID, the idea was not to put USAID out of business. The idea was to come up with a complementary set of tools to USAID and also to challenge USAID to implement its programs with the same degree of rigor.

And in point of fact when we designed MCC we specifically created the CEO role as the same rank right down to salary level as the administrator of USAID and the global AIDS ambassador so that all three would be on a par—all three would work together in a complementary fashion.

GOODMAN: OK. Witney, the gentleman here on the first table.

Q: Great. Thank you very much. Fantastic conversation. Thanks for doing this.

Witney Schneidman, Schneidman Associates, former deputy assistant secretary for Africa.

Alice, my question really goes to the China issue. For instance, we just had an experience in west Africa with the coup in Niger that led to MCC suspending its compact—regional compact that would put a $450 million road from Niger to Benin to the port. At the same time that MCC was suspending its compact China was turning on the tap of a $5 billion oil pipeline.

So my question is, you know, what role does MCC play in helping rebuild democracy when compacts are lost. Do countries want to get back? Does it become an incentive for different interest groups in countries to try to bring back the democracy and, indeed, the programs that they lost?

ALBRIGHT: It’s a great question and one of—I didn’t get to it earlier but some of the hardest yards, using an Australianism—some of the hardest yards that we work on is on democracy. So you’re absolutely right. If there—if a country has a coup not only due to 7008 but due to our own eligibility frameworks, we have to step away. And we did step away in Niger. It was tragic.

Actually, the Benin side of that Benin-Niger regional compact is continuing. But we do step away and we step away for sort of two reasons. One is a values-based region, which is why should we be using U.S. taxpayer money to fund countries that are run by juntas.

And then the second reason is that we take the view, and there’s some exceptions to this, that economic growth is going to proceed better if it is done in a democratic context and to help democracies deliver. So those are the sort of rationales.

Now, we have a variety of tools that enable us to continue to engage. One is—well, we’re always in touch with countries no matter what because we’re scoring a lot of countries and we often get asked questions about that whole—you know, that whole process.

When Niger or any other country that’s had a coup wants to have an election and get back on track with the democratic process we are happy to start talking to them and start talking to them early, and start talking about how can we begin to start talking to them again. And so we’re open on that one, but we’re not in a position to work with countries that have had coups.

Now, there are lots of other circumstances where a country will slide back a bit. We may have to put a program on pause. We may have to take a decision about calibrating how we’re engaging.

But we have a lot of conversations—we’ll have some of them next week up in New York—with countries about where we’re seeing concerns about their democratic pathway and that’s probably one of the—in addition to sort of some of the development impacts we have some of the strongest impacts we’ve had is around the incentive to countries to stay being democracies.

It’s a great story that MCC can tell and we’ve had some profound impacts. Not everywhere. This is hard yards, this one, but there are a lot of countries we’re able to say we helped that country stay on a democratic pathway.

GOODMAN: Super. The lady at the table next. Yeah.

Q: Thank you. Maureen Ahmed from the State Department. I’m currently in the Bureau of Democracy, Human Rights, and Labor, and I started off my PMF career at State at PEPFAR. So thank you, Gary. It was a great experience.

My question is more on disinformation and public diplomacy around MCC. I cover the Indo-Pacific and I know there has been challenges in the region in Sri Lanka and writ large on getting compacts through, especially with Chinese disinformation in the country on U.S. aid.

So I’d love to hear from you about your work and other ideas on how do we counter those disinformation campaigns, especially since this is proliferating a lot in really key strategic areas where we need to come in and provide that help.

Thank you.

ALBRIGHT: It’s a great question. You’re absolutely right.

One of the—I’ve only been at MCC for, you know, two and some years but if you talk to people—and there’s two of them in the back, Jonathan and John Wingle in the back. Hi guys. They’ve lived with some—a lot of this, particularly Jonathan.

We do increasingly encounter pressure, misinformation, disinformation campaigns in countries that don’t want us there and a really good example is Nepal where it took us five years to get that compact approved by the parliament. It’s now been approved and we’re now working on it.

But one of the things it’s told us is that when we think about the staffing and the skill sets and the capabilities that we need to have in country, in addition to great technical capability we also need great thinking on how do we counteract the mis- and disinformation.

And then so it’s something that we’re more regularly doing, depending on the country. We particularly see this in Asia but I expect that we’ll see it moreover and it’s going to become more of our sort of daily bread in terms of how we think about the skill sets that we need.

GOODMAN: OK. The gentleman behind there. Yeah.

Q: Hi. Dan Mejia with Associated Press, former State Department.

I wanted to ask Ms. Albright more about how you are modernizing MCC, and the reason why I bring this up is because, you know, frankly speaking, it does feel like listening to all of you today we’ve kind of gone back in time twenty years.

There’s a lot of American exceptionalism imbued in this conversation, kind of a didactic view of the U.S. working with the world, and I think that this is out of fashion in 2024 just like neoliberalism, and the Global South has taken a very different approach to how they engage with countries and really don’t want to be preached like this anymore.

And, I mean, The New York Times yesterday was saying after the second assassination attempt that many countries overseas are genuinely worried about what’s going to happen in November. So I just wanted to kind of hear how this all works vis-à-vis what’s happening, like, today.

Yeah. Thanks.

GOODMAN: All right. A lot in there but I think the essence is, is this fit for purpose what we’re doing here through MCC?

ALBRIGHT: I think the answer is yes, and I think Gary touched on it a little bit when he talked about—he talked about localization.

So the way that we work and we have since the beginning is hand in hand with countries as partners and the process starts by a very data-driven question, which is what is the biggest challenge to economic growth.

So it’s not us sitting in Washington over on Fourteenth Street answering that question alone. It’s working closely with the countries to figure out the answer to that question, and then we go to the next step and figure out, OK, so what projects. We do something called a root cause analysis, which basically helps us identify what kinds of projects will overcome the constraint to growth and then we figure out what those are.

The countries get to choose both the sectors and the projects so they are very much in the driver’s seat, and then we set up an entity in each country to actually implement the work and it is staffed by local experts and it is governed by locals who tend to be a mixture of, depending on what the sector is, people from the civil society, from the private sector and, of course, from the government. And they are very much in the driver’s seat on how the programs get executed.

So if you think about that, that’s our business model and how we execute our work. If you compare that—this is a big generalization, but if you compare that to how a lot of other international aid happens it happens often very directed from headquarters and often with contractors that are direct from headquarters.

I’m not just talking about when AID is trying to change this. That happens in a lot of other G-7/G-20 aid environments. So we are quite different, and when we talk about partnering and country ownership and country priorities it’s not just rhetoric for us. It’s very real in how we do our work sort of from start to finish.

And you—the ambassador may want to comment on that in terms of how we’re getting started in Belize.

YOUNG: Yeah. But you’re exactly correct. The approach—like you said, it’s a partnership approach that we really appreciate. You know, I hear the question but I guess maybe it’s my engineering background. For me, dogma and all that doesn’t matter. It’s results that matters. If we’re doing things the way they were being done twenty years ago, if it works it works. That’s our approach to development.

So, again, the approach that the MCC has taken is exactly what we would like to see. They’re helping us to do things that, I’ll be honest, sometimes it’s politically difficult to do on your own and this kind of compact, this kind of partnership, is just perfect to get especially things like, you know, education and putting in long-term development processes in place.

I think it’s perfect for right—that’s my naive view on the matter.

GOODMAN: OK. Other questions? Yes, ma’am.

Q: Thank you. Amy Stambach, University of Wisconsin Madison. I’m a cultural anthropologist working primarily in east Africa and southern Africa.

And I wonder if one might—and also a CFR IAF fellow this year—I wonder if one might think about the twenty-year horizon in terms of developing a cooperation. The model that you have is sort of a little bit overlapping with USAID, with World Bank, and OECD as well, and OECD is an organization of cooperative economic development that brings partners together. It does decenter the State model—the U.S. central model of this.

But given that your vision is to get out of business why not transform these success stories into partnerships across agencies or organizations—countries that you funded?

Thank you.

GOODMAN: OK. Alice, and then, Gary, I’m interested in your view on that as well.

ALBRIGHT: We do—while we have a—while we are a bilateral aid agency and we do have a pretty distinctive business model we do work with some of the others that you’ve mentioned, particularly the World Bank and AID, depending on what country we’re talking about.

One of the things that we do when we start working on a country is sort of look at kind of a donor landscape to figure out who’s doing what so that we’re not overlapping because it doesn’t make sense to be duplicative.

But we’re happy to work with the others. Of course, everyone looks at the OECD DAC information, the PISA information, and lots of the other stuff that the OECD DAC does, but we’re happy to work with the others.

GOODMAN: Gary, do you have thoughts about that?

EDSON: My first thought is the only degree I have that’s done me any good is my degree in anthropology. (Laughter.) So it’s great to have your question. My law degree helped as well.

GOODMAN: Got him hired by Ambassador Hills so that’s—

EDSON: I got hired by—I have to say to Ambassador Hills that my—I have an MBA also so. (Laughter.) But, you know, there should be greater cooperation globally. Part of the problem, I think, is that, frankly, MCC was ahead of the curve in some respects. As I said, it really broke the mold, and contrary to the question it’s not based upon American exceptionalism. It’s based on countries being in the driver’s seat and that model and the data-driven approach is one that we, I think, are eager to share and see adopted by other agencies around the world to the extent and, certainly, can see cooperating on that level.

It would be great if more bilateral development agencies were to embrace the same rigor with which MCC approaches it and the same true partnership where it’s really countries making decisions, not the donor making the decisions. I mean, we’re an investor and a partner in this process.

By the way, and let me just say one other thing. There was a question about the private sector, which is the other partnership that has to occur here, as Matt and Alice both noted. Being an MCC compact country—and maybe the ambassador can speak to this—is sort of a good housekeeping seal of approval it’s become to attract investment from all sources—private investment—because it says this is an environment in which we can do business and that is, in fact, one of the major purposes of MCC, as I said—to transition to private sector-led development.

And the final point that I would make is that MCC has enormous discipline and the—most aid is seen as an entitlement. With MCC you earn it, and if there is backsliding MCC can and has on occasion pulled the plug, and that was a dramatic change and one of the key things that that we built into MCC was the ability to turn the spigot on and off if countries—if there was backsliding involved.

That doesn’t mean we don’t continue to engage with those countries, as Alice said, but that discipline, I think, is something that distinguishes MCC from a lot of other aid agencies around the world.

GOODMAN: OK. CFR has a very strict rule about ending on time but I just want to give Alice, if there’s a benediction or any final point you want to make that you don’t think has been covered. Otherwise, we can close off with the ambassador.

ALBRIGHT: Well, I will just say, first of all, thank you. But it’s wonderful that RealEcon is being kicked off. I’m very enthusiastic about it and I would really encourage you, Matt, and all the other CFR members to continue to remind all of us about why international development is such a critical part of our overall foreign policy.

Sometimes it gets a little lost in the shuffle. It can’t, for so many reasons. I could go on for hours about that. But I really applaud you for doing it and I really encourage from all the different seats that you all occupy keep making the case. It’s so important.

GOODMAN: Great. Thanks.

Well, again, not a plant but very welcome because we do really think this is an important part of our project on real and reimagining American economic leadership, and so this event was just an important way to really kick us off on this part of the conversation.

I really appreciate Alice, Ambassador Young, Gary, your joining us today. Please join me in thanking them for their great comments. (Applause.)

(END)

This is an uncorrected transcript.