Podcast Summary: "Hating on the MCC’s Corruption Hurdle"

Podcast: The CGD Podcast
Host: Center for Global Development (Lawrence MacDonald)
Guests:

• Alicia Phillips Mandaville (Managing Director of Development Policy, Millennium Challenge Corporation—MCC)
• Charles Kenny (Senior Fellow, Center for Global Development—CGD)
• Casey Dunning (Policy Associate, CGD)
  Date: April 14, 2014
  Topic: Evaluating and debating MCC's use of a "hard hurdle" on corruption for foreign assistance eligibility

Episode Overview

This episode explores the Millennium Challenge Corporation’s (MCC) approach to combating corruption through its "hard hurdle" on corruption: a key requirement for country eligibility to receive US development aid. The discussion, prompted by a critical CGD paper titled "Hating on the Hurdle," dives deep into the strengths, shortcomings, and potential reforms of the current methodology, and what smarter, more actionable policy could look like. Alicia Phillips Mandaville offers the MCC’s perspective and response, while Charles Kenny and Casey Dunning articulate their critiques and suggested reforms.

Key Discussion Points & Insights

1. What is the Millennium Challenge Corporation (MCC)?

• Mandate:
  • Independent US foreign aid agency established to experiment with data-driven, transparent, and accountable foreign assistance investments.
  • Focuses on three core ideas: country policy assessment using third-party data, fostering country ownership in investments, and enforcing greater accountability through measurement and transparency (01:53).
• Background:
  • Born out of desire to move away from politically motivated aid allocations (e.g., “money to our friends, not our enemies”) and toward supporting countries with sound governance (02:54).
  • Has enjoyed bipartisan support in Congress for being "rigorous" and "sound" (03:40).
  • Relatively small in size (300 staff, $900M budget, working with 25 countries as of 2012) but has an outsized influence due to its unique approach (05:33).

2. The Corruption Hard Hurdle: What Is It?

• MCC’s eligibility criteria are based on a “scorecard” of indicators (ruling justly, encouraging economic freedom, investing in people).
• Countries must pass at least 10 indicators, but must always pass two “hard hurdles”: democracy (not covered here) and corruption (06:03).

3. Problems with the Corruption Indicator

• Charles Kenny:
  • MCC uses the World Bank’s Worldwide Governance Indicator (WGI) for corruption—the best available global measure—but “the best isn’t good enough” (06:34).
  • The corruption metric is an amalgamation of perception surveys, self-reported bribe payments, and assessments of laws—resulting in fuzziness and wide margins of error (07:32).
  • “Perceptions of corruption is not a policy.” Instead, it’s “broad, amorphous, corruption-y, perception-y thing.” (21:23)
• Casey Dunning:
  • Evidence linking these corruption indicators with real-world development outcomes is weak; “if we’re looking at the corruption indicator...the connection is not necessarily always there” (09:02).
  • The “hard hurdle” penalizes countries that appear to be improving, simply because the median (comparative) benchmark moves (09:45–10:14).
  • Example: Sierra Leone and Benin lost eligibility mid-process after failing to keep up with relative improvements, despite actual progress (10:14).

4. MCC’s Perspective and Practice

• Alicia Phillips Mandaville:
  • Emphasizes the necessity of using available third-party data; “what we have on the scorecard right now truly does cover every country in the world and we need that” (28:00).
  • Admits the system isn’t perfect—scorecard data is supplemented by other evidence and narrative, but for the key first stage, the hard hurdle remains (11:57, 12:44).
  • Board has discretion to review additional information (transparency initiatives, anti-corruption reforms) but has not overridden a scorecard fail since MCC’s first meeting in 2004 (12:44).
  • On ongoing reforms: There’s recognition that “tracking change year on year is harder and the scorecard wasn't set up to do that” and a need for “measures that are both actionable and measurable and practical” (28:00, 29:25).

5. Policy Recommendations and Tradeoffs

• CGD Recommendations:
  • Charles: Replace broad perception indices with more granular, policy-actionable indicators (vaccination rates, anti-police-bribery stats); perhaps MCC could fund new, better data collection (20:42, 21:31, 22:35).
  • Casey: Given the lack of statistically significant examples of improvement and “hard hurdle” effectiveness, recommends dropping or significantly revising the hard hurdle (24:40–25:09).
• Political Realities:
  • The optics of “dropping the hard hurdle” could be problematic in Congress, risking accusations of being “soft on corruption.” Nuanced reform might focus on differentiating between original eligibility and ongoing eligibility during compact development (26:04, 26:48).
• Mandaville’s Response:
  • Acknowledges limitations, pushes for collective action on better governance data, stresses importance of using independent sources to avoid “tinkering” accusations (23:02, 24:13).
  • Excited about building collaborations among data producers and users, linking this to broader global initiatives on data and governance (29:25).

Notable Quotes & Memorable Moments

• On the MCC Approach:
  • “We are the, if you’ve heard of us, we’re the foreign assistance agency that does those things…If you haven’t heard of us, we’re the small foreign assistance agency that you haven’t heard of.”
    —Alicia Phillips Mandaville (01:53)
• On Indicator Flaws:
  • “The best isn’t good enough.”
    —Charles Kenny, on the corruption indicator used (06:34)
  • “Perceptions of corruption is not a policy…that’s a very fuzzy measure of a lot of different things, some of which may be policy actionable…”
    —Charles Kenny (21:23)
• On Real-World Consequences:
  • “There are very real world consequences to this highly technical discussion.”
    —Casey Dunning (10:14)
• On Lack of Policy Actionability:
  • “Only one country in the MCC’s 10 year history moved from statistically failing the corruption indicator to passing…the hard hurdle is not designed to account for it.”
    —Casey Dunning (24:40)
• On Board Discretion and Reform:
  • “The board has discretion, period, full stop…The idea behind a scorecard was can you take data and use it to start your decision making with and can you use it to be accountable…”
    —Alicia Phillips Mandaville (19:06)
• On the Broader Data Revolution:
  • “Trying to work with the folks who actually produce data on governance…there's finally a world in front of us where all those people want to talk about data. And we're going to. So that's like I'm really excited about that.”
    —Alicia Phillips Mandaville (29:25)

Important Timestamps

• What is MCC? — 01:53
• History and bipartisan support — 03:40
• Details on the hard hurdle and indicators — 06:03
• Why the corruption indicator is problematic — 06:34–09:02
• Consequences of failing the hard hurdle (Benin, Sierra Leone) — 09:45–10:41
• MCC practice on supplementing data and board discretion — 11:24–13:07
• How board and staff handle technical ‘wiggle room’ — 16:46–19:06
• Critique: Need for actionable, outcome-linked indicators — 20:42–22:35
• Recommendation: Drop or revise the hard hurdle — 24:40–25:09
• Political constraints with Congress — 26:04–26:48
• Mandaville’s wrap-up on moving forward, actionable data — 28:00–30:03

Tone and Style

• The conversation is expert, candid, and occasionally playful (“I was outvoted,” “I love that 20 something title, hating on the Hurdle”), but rooted in real technical and policy substance.
• Critiques and defenses are direct but collegial, with an emphasis on data, accountability, and practical governance challenges.

Conclusion

The episode offers a thorough, frank look at the difficulties of operationalizing anti-corruption principles in international aid. While MCC’s ambition to use data-driven “hard hurdles” is lauded for its transparency and rigor, its reliance on imperfect, perception-based indicators raises questions of fairness, effectiveness, and even political practicality. Both the CGD panelists and MCC’s Mandaville agree on a shared vision: the need for better, more actionable data to drive smart, effective, and truly accountable development policy.