CGD Podcast Episode Summary: "MCC at Ten"

Podcast: The CGD Podcast
Host: Rajesh Merchandani
Guests: Sarah Rose (Senior Policy Analyst, CGD), Frank Wiebe (Visiting Fellow, Georgetown/CGD)
Date: February 3, 2015
Theme: Reflecting on the first 10 years of the Millennium Challenge Corporation (MCC), evaluating its innovations, impact, and recommending ways to strengthen its future role in U.S. development policy.

Overview

This episode delves into a decade of the Millennium Challenge Corporation (MCC), an independent U.S. government agency dedicated to reducing global poverty through economic growth. Rajesh Merchandani leads a discussion with Sarah Rose and Frank Wiebe—both policy experts and former MCC staff—exploring MCC’s model, successes, and major challenges. The guests share critical insights from their research, focusing on transparency, results-orientation, and adaptive partnerships, as well as offering recommendations for MCC’s future.

Key Discussion Points and Insights

1. Origins and Innovations of the MCC (00:00–03:55)

• Founded in a climate of skepticism: MCC emerged when doubts were growing about the effectiveness of traditional aid, which often juggled conflicting priorities (e.g., humanitarian relief vs. development support).

  • Sarah Rose: “To actually have an agency that focuses exclusively on growth as an objective allows MCC to really focus on achieving the development outcomes that foreign assistance a lot of times purports to achieve.” [01:45]

• Unique approach:

  • Focuses on “good governance, economic freedom, and investing in their own people.”
  • Operates with a relatively large budget (~$1.2 billion/year).

2. Country Selection and the Scorecard System (03:51–04:40)

• Country Scorecards: Objective, data-driven system using third-party metrics to select partners. This transparency minimizes politicization in aid selection and channels funds to “well-governed” countries.
  • Sarah Rose: “There’s very few other development agencies worldwide that really have that kind of focus on good governance... MCC has used a largely transparent, public-facing process to try to identify those countries, to depoliticize the choices.” [02:40]
  • Frank Wiebe: “The country scorecards are basically a way that MCC gathers data from a number of independent third-party institutions... health, education, economic governance, things like that.” [03:57]

3. Results Orientation – Successes and Challenges (05:00–09:29)

• Framework for Results: Every MCC investment requires a transparent, up-front explanation and justification: intended impact, cost-benefit, and a focus on not funding projects unlikely to yield sufficient results.

  • Frank Wiebe: “If there are things that we know will deliver substantial benefits to the people we care about, then we should focus our investments and our efforts in those things, rather than on speculative investments.” [05:00]

• Strong record, but not flawless:

  • 90% of projects supported by robust economic analysis; about 10% either speculative or with insufficient justification.
  • Frank Wiebe: “That’s actually a pretty good track record. Only 10% of the portfolio doesn’t fit the stated analytical framework.” [06:21]
  • The 10% “gap” is still significant—around $120 million annually, or ~1 billion over 10 years [07:17]. Benefits not always clear and rescoping can reduce transparency.
  • Frank Wiebe: “It’s not the glass being half full—the glass is 90% full... But…what happened in those 10% of the cases?” [08:29]

• Implementation discipline: Changes during project rollout (“rescoping”) are less transparently managed than up-front decisions, creating risks that misalign with original results-driven goals.

4. Transparency: Core Recommendation (10:55–13:42)

• Transparency issues: Over 15 of the team’s 31 recommendations focus on transparency.

  • Frank Wiebe: “There’s the old adage that sunlight is the best disinfectant. MCC has built into its practices some of the best systems for driving an aid agency to deliver results...” [10:55]

• Why transparency matters: Real-time transparency deters political pressures and agency incentives that might otherwise prioritize spending or expedience over results.

  • Frank Wiebe: “When decisions are made midstream...and that information only becomes available after the program is completed, obviously managers are susceptible to making decisions for political pressures, rather than the main focus...to deliver results.” [12:42]

5. Flexibility and Partnership Duration (13:42–17:14)

• Flexibility in engagement: The early view that a ‘five-year compact’ would “fix” a country was naïve. Development is non-linear and requires adaptive partnerships.

  • Frank Wiebe: “Whenever we hear the term transformational development, we become suspicious... rarely are aid agencies the agent of transformational change. Instead, development is a long-term process…” [14:08]

• Multiple compacts: They argue that longer-term and repeated partnerships may be necessary and should not be stigmatized if progress is being made, with the need for a nuanced, country-by-country approach.

6. Pitfalls, Improvements, and the Next 10 Years (17:14–21:52)

• Pitfalls to avoid:

  • Over-reliance on rigid quantitative criteria can lead to misguided decisions.
  • Small statistical fluctuations in indicators shouldn’t disrupt productive, faith-based partnerships.
  • Sarah Rose: “Countries may meet MCC’s criteria and look like a reasonable development partner in one year and in the next year the scorecard might look slightly different...when there’s been no change on the ground.” [17:33]

• Nuanced decision-making: Selection and renewal decisions must balance data with on-the-ground realities.

• Stay disciplined and accountable: Only fund what’s truly worthwhile.

  • Frank Wiebe: “Do this and you will succeed: You don’t spend money on things that you know are not worth the cost. MCC has, for the most part, avoided that. But…even a small share of a large pot of money can become a large amount over time.” [20:15]
  • Criticizes past examples where MCC funded poorly designed or speculative projects, citing Indonesia as a warning.

Notable Quotes & Memorable Moments

• On focus:

  • Sarah Rose: “To actually have an agency that focuses exclusively on growth as an objective allows MCC to really focus on achieving the development outcomes that foreign assistance a lot of times purports to achieve.” [01:45]

• On transparency and accountability:

  • Frank Wiebe: “Sunlight is the best disinfectant... transparency and the pressure to tell people what they’re doing and why becomes a force to ensure they’re making decisions around results rather than around other factors.” [10:55–12:42]

• On the myth of quick transformation:

  • Frank Wiebe: “Whenever we hear the term transformational development, we become suspicious... development is a long-term process that is not linear.” [14:08]

• On prudent spending:

  • Frank Wiebe: “You don’t spend money on things that you know are not worth the cost... [MCC] needs to emphasize its focus on accountability, not making bad decisions on investments. And when [investments]…turn out to not be good, they need to have the strength and discipline to…shift the money to investments that make sense.” [20:15–21:52]

Episode Timestamps

• 00:00 – Introduction to MCC and agency mission
• 01:45 – MCC’s innovation and model explained
• 02:40 – What MCC has done well, especially in country selection
• 03:51 – Explanation of the scorecard system
• 05:00 – Results orientation and evidence-based investments
• 06:21 – Discussion of the 10% of investments not justified by analysis
• 10:55 – Main recommendations: transparency as a cornerstone
• 13:42 – Need for longer-term, flexible partnerships
• 17:33 – Pitfalls and how scorecards can be misused
• 20:15 – Advice for MCC’s future: accountability and disciplined spending

Tone and Language

• Conversational but analytical, balancing praise for MCC’s innovations with frank critique.
• Speakers use accessible language while diving into complex policy details.

Conclusion

The episode provides a nuanced, constructive critique of MCC’s first decade. The hosts and guests praise its objectivity, focus on results, and transparency, but emphasize the need for continued vigilance, especially in adapting to on-the-ground realities and resisting bureaucratic or political pressures. Their central message: transparency, flexibility, and disciplined, evidence-based spending are key to MCC’s next decade of success.