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  • Special Publication:  NEXT
  • February 2016

A Model Validated


Twelve years later, the answers to those questions are in, and they validate MCC’s founding principles and model:

Economic growth drives poverty reduction

Sustained and inclusive growth has been shown to be the most powerful engine of poverty reduction.  Data confirm this relationship for MCC program countries:  in fact, for those countries, the incomes of the poor have increased at least as fast as the increase in average income.[[Ospina, S. “Background Paper on Inclusive Growth Concepts In the Context of the Millennium Challenge Corporation”, MCC, Internal Report, 2014.]]

Selectivity works 

Importantly, MCC’s objective selection criteria have proven well-founded. The evidence shows that:

  • Corruption is a major drag on GDP.[[Olken, Benjamin A. and Rohini Pande. “Corruption in Developing Countries,” Annual Reviews of Economics 4 (2012): 479-509.]]
  • Democratic rights are crucial to sustainable development.[[Halperin, Morton H, Joseph T. Siegle, and Michael M. Weinstein. The Democracy Advantage: How Democracies Promote Prosperity and Peace. Council on Foreign Relations, 2010.]]
  • Corruption and disenfranchisement undermine stability and create fertile ground for violence.
  • Failing to invest in the poor limits economic mobility and worsens inequality.[[Ravallion, M. and Datt, G. “Why has economic growth been more pro-poor in some states of India than others?” Journal of Development Economics 68 (2002):381-400.]]
  • Education and health investments boost productivity and growth.

Further, poor countries can and do meet MCC’s criteria for eligibility. And the USG has consistently respected the criteria in making selection decisions and in determining whether to terminate or alter compacts when countries regress.

Reform can be incentivized

With the incentive of being selected for an MCC compact, many countries pursue the right policies, make data-driven investment decisions, and implement projects effectively. Put another way, what has been termed the “MCC Effect”—the reforms incentivized by MCC’s scorecard and country selection system—is real and observable. This not only amplifies the effectiveness of MCC’s investments, it also advances American interests and creates the enabling conditions for the private sector to flourish.

MCC’s experience has demonstrated that compacts offer the opportunity to make the logic and case for reform politically compelling. Combining support for reform with support for project investments helps governments realize tangible gains through difficult decisions. Country ownership and genuine partnership are achievable

Countries have truly “owned” their projects, taking a lead role in compact development and execution.  And MCC has developed a genuine partnership with these countries.  Rather than dictating the path of development, it plays the role of supporting actor to the lead role of the country – including the government, civil society, and private sector.

Major infrastructure projects are possible in five years

MCC is now recognized worldwide as a leader in helping poor countries select, design, and complete large-scale infrastructure projects in five years in difficult contexts—meeting high construction, environmental, and social inclusion standards. These projects are connecting people and communities to jobs, markets and opportunities to lift themselves out of poverty.

Data-driven rigor and transparency helps, not hurts

With MCC help, government partners embrace use of analysis identifying constraints to economic growth, cost-benefit analysis, and robust monitoring and evaluation (M&E) plans as the drivers of resource allocation, project design decisions, and results measurement.

MCC has been recognized for its leadership in transparency—ranked the most transparent aid agency in the world in 2013 and consistently in the top three since then. Far from jeopardizing funding, this transparency represents one of MCC’s key assets.