Public housing has long been criticized as a breeding ground for concentrated poverty, under-achieving schools and for its lack of access to services. As a means to expand opportunity to some of the nation’s most impoverished communities, the Obama administration has proposed the Choice Neighborhoods Initiative, a program that aims to take the current HOPE VI program beyond public housing by transforming these neighborhoods in a new way.

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• Choice Neighborhoods Initiative will Revitalize Poor Communities

      

       

       

       

       

       

       

SUMMARY

Replacing inefficient kerosene lighting with electric lighting or other clean alternatives can rapidly achieve development and energy access goals, save money and reduce climate warming. Many of the 250 million households that lack reliable access to electricity rely on inefficient and dangerous simple wick lamps and other kerosene-fueled light sources, using 4 to 25 billion liters of kerosene annually to meet basic lighting needs. Kerosene costs can be a significant household expense and subsidies are expensive. New information on kerosene lamp emissions reveals that their climate impacts are substantial. Eliminating current annual black carbon emissions would provide a climate benefit equivalent to 5 gigatons of carbon dioxide reductions over the next 20 years. Robust and low-cost technologies for supplanting simple wick and other kerosene-fueled lamps exist and are easily distributed and scalable. Improving household lighting offers a low-cost opportunity to improve development, cool the climate and reduce costs.

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Editor’s Note: An interactive feature, highlighting the key findings from this report, can be found here.

Over a billion people worldwide live on less than $1.25 a day. But that number is falling. This has given credence to the idea that extreme poverty can be eliminated in a generation. A new study by Brookings researchers examines the prospects for ending extreme poverty by 2030 and the factors that will determine progress toward this goal. Below are some of the key findings:

1. We are at a unique point in history where there are more people in the world living right around the $1.25 mark than at any other income level. This implies that equitable growth in the developing world will result in more movement of people across the poverty line than across any other level.

2. Sustaining the trend rate of global poverty reduction requires that each year a new set of individuals is primed to cross the international poverty line. This will become increasingly difficult as some of the poorest of the poor struggle to make enough progress to approach the $1.25 threshold over the next twenty years.

3. The period from 1990 to 2030 resembles a relay race in which responsibility for leading the charge on global poverty reduction passes between China, India and sub-Saharan Africa. China has driven progress over the last twenty years, but with its poverty rate now down in the single digits, the baton is being passed to India. India has the capacity to deliver sustained progress on global poverty reduction over the next decade based on modest assumptions of equitable growth. Once India’s poverty is largely exhausted, it will be up to sub-Saharan Africa to run the final relay leg and bring the baton home. This poses a significant challenge as most of Africa’s poor people start a long way behind the poverty line.

4. As global poverty approaches zero, it becomes increasingly concentrated in countries where the record of and prospects for poverty reduction are weakest. Today, a third of the world’s poor live in fragile states but this share could rise to half in 2018 and nearly two-thirds in 2030.

5. The World Bank has recently set a goal to reduce extreme poverty around the world to under 3 percent by 2030. It is unlikely that this goal can be achieved by stronger than expected growth across the developing world, or greater income equality within each developing country, alone. Both factors are needed simultaneously.

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Should increasing exports be part of the solution to Greater Cleveland's -- and the nation's -- economic doldrums? Can export growth make this recovery job-filled rather than jobless?

That's a counterintuitive proposition, but one that is gaining traction in Northeast Ohio. Cleveland, Youngstown and other metros often see themselves on the losing end of globalization, as manufacturing has moved abroad and trade barriers and currency manipulations impede the entry of U.S.-made goods into foreign markets.

But exports bring tremendous benefits to workers, companies and the nation as a whole. Exporting companies tend to be more innovative. They pay higher wages across all skill levels. And they are a response to a new global reality: 95 percent of the world's customers live outside the United States.

Any successful export strategy, including the one that the Obama administration is developing, must start with where U.S. exports come from. Our major metropolitan areas are the nation's export hubs. In 2008, they produced about 64 percent of U.S. exports, including more than 62 percent of manufactured goods and 75 percent of services.

Northeast Ohio's major metros are leaders in exports, oriented toward global consumers in a way that most American regions are not. Exports contribute more than 12 percent of the gross metropolitan product in Akron, 13 percent in Cleveland, and a jaw-dropping 18 percent in Youngstown, compared to a national metro average of 10.9 percent.

Exports are also a source of much-needed jobs in these metros. As of 2008 (the most recent year for which we have data) there were 110,000 export jobs in the Cleveland metro and about 30,000 each in greater Akron and Youngstown. Every $1 billion in exports from the average metropolitan area in 2008 supported 5,800 jobs.

To leverage the powerful export activity already occurring in Cleveland and elsewhere, the Obama administration should connect its macroeconomic vision for export growth with the metro reality where the doubling will mostly occur.

For example, the president's export advisory council should include state and local leaders, and revamp export guidance and support to meet the needs of small firms, which find it hard to enter new markets.

But Northeast Ohio metros have their own work to do. The rate of export growth between 2003 and 2008 in Cleveland and Akron is lackluster when compared to the large metro average. U.S. companies dominate the global market in service exports, and the nation actually has a generous service trade surplus, but service exports' share of overall output in Northeast Ohio metros is smaller than the large metro average, and growth in service exports is slower.

Most troubling, Cleveland and its neighbors are underperforming when it comes to innovation, which is a critical ingredient for future international success. Metros that are manufacturing-oriented or export-intensive (or both) tend to create patents at a rate of just over five patents per 1,000 workers. But Cleveland, Akron and Youngstown fall short, with 2.8, 4.5, and 1 patent per 1,000 workers, respectively.

Northeast Ohio must accelerate its efforts to increase the region's innovation and export capacity, through regional organizations such as NorTech and JumpStart. Just as the president set an export goal for the nation, Northeast Ohio should embrace the opportunity to set its own aggressive export goals. Business groups, the Fund for Our Economic Future, universities and regional economic development organizations have made a start but need to devote more resources and collaborate to achieve those goals.

The region can make this happen. Organizations like the Manufacturing and Advocacy and Growth Network (MAGNET) and its partners, with support from the Fund and chambers, are working directly with companies to increase manufacturing innovation in Northeast Ohio, with increasing exports one of their major emphases.

For too long, the debate over export policy has been the exclusive domain of macro policymakers in Washington and a narrow clique of trade constituencies. It is time to include a larger portion of the business sector and, just as importantly, the places like Northeast Ohio, where exporting companies can thrive.

       

       

       

       

       

Premier Li Keqiang's government work report was a pragmatic and concrete one, pointing out challenges as well as strengths and opportunities, according to a US-based China scholar.

The report, delivered by Premier Li at the opening of the fourth session of the 12th National People's Congress (NPC) on Saturday, is now being deliberated by some 3,000 deputies.

Cheng Li, director of the John L. Thornton China Center of the Brookings Institution, said the report tells people that the Chinese economy is facing difficulties as a result of structural reforms, the need for better environmental protection and the impact of a sluggish global economy.

"It tells the public that such economic challenges will last for a period of time, so the report does not give the public an unachievable expectation," Cheng Li said.

Meanwhile, the report has also elaborated on China's strength, such as the potential to be unleashed in urbanization, the development of the service sector, the employment policy and the innovation policy, according to Cheng Li.

"So this is a report that neither gives the public too high an expectation nor disappointment," said Cheng Li, whose research has focused on the transformation of Chinese leaders and technological development in China.

Cheng Li believes that this is especially important during the coming two years, or the beginning years of the 13th Five-Year Plan (2016-2020), when there won't be excessive high economic growth rate, something he said China also does not need.

In the work report, China's gross domestic product (GDP) growth in 2016 has been set between 6.5 percent and 7 percent. It is the first time since 1995 for the target to be in a range rather than one single number.

China's economy grew by 6.9 percent in 2015, the lowest in a quarter of a century, but it was still among the highest in the world.

According to the report, an average annual growth of at least 6.5 percent should be maintained in the coming five years in order to achieve the goals of doubling GDP and household income by 2020 from the 2010 levels.

It also says that by 2020, the contribution from scientific and technological advances should account for 60 percent of GDP growth.

Cheng Li said structural reforms will bring a lot of challenges, all of which would require dealing with by the Chinese government.

He described the goals in the work report as very specific. "There isn't much empty content and slogan type of things," he said.

"It is what the Chinese public wants to see... and it's a relatively balanced and good report, one quite pertinent to China's situation today," Cheng Li said.

He hoped that the report had emphasized more that many of the challenges are also opportunities. "It is just the beginning and the potential is huge," he said, citing how areas such as environmental protection could help job creation and business opportunities.

To Cheng Li, the potential opportunities will help small- and medium-sized companies, large companies, Chinese companies overseas and foreign-funded companies in China break new ground.

Cheng Li said the growth targets set in the 13th Five-Year Plan are quite reasonable. "More than 90 percent of what's in the 12th Five-Year Plan (2011-2015) had been achieved, and there is a better reason to achieve what's in the 13th Five-Year Plan," he said.

This piece was originally published by China Daily.

       

       

INTRODUCTION 

Last year, President Obama delivered the first step in his promise to reach out to the Cuban people and support their desire for freedom and self-determination. Premised on the belief that Cuban Americans are our best ambassadors for freedom in Cuba, the Obama administration lifted restrictions on travel and remittances by Cuban Americans. The pent-up demand for Cuban American contact with the island revealed itself: within three months of the new policy, 300,000 Cuban Americans traveled to Havana -- 50,000 more than for all of the previous year.  Experts estimate that over $600 million in annual remittances has flowed from the United States to Cuba in 2008 and 2009 and informal flows of consumer goods is expanding rapidly.

The administration’s new policy has the potential to create new conditions for change in Cuba. However, if U.S. policy is to be truly forward looking it must further expand its focus from the Castro government to the well-being of the Cuban people. Recent developments on the island, including the ongoing release of dozens of political prisoners, have helped create the right political moment to take action.  The administration should institute a cultural diplomacy strategy that authorizes a broad cross-section of American private citizens and civil society to travel to the island to engage Cuban society and share their experiences as citizens of a democratic country.  Reducing restrictions on people-to-people contact is not a “concession,” but a strategic tool to advance U.S. policy objectives to support the emergence of a Cuban nation in which the Cuban people determine their political and economic future.

The President has the authority to reinstate a wide range of “purposeful,” non-touristic travel to Cuba in order to implement a cultural diplomacy strategy. Under President Clinton, the Baltimore Orioles played baseball in Havana and in return the Cuban national team was invited to Baltimore. U.S. students studied abroad in Cuba and engaged in lively discussions with their fellow students and host families. U.S. religious groups provided food and medicines to community organizations, helping them assist their membership.  However, in 2004, such travel was curtailed, severely limiting U.S. insights about the needs, interests and organizational capacities of community groups and grassroots organizations. Today, visitors traveling under an educational license, for example, number a meager 2,000 annually.

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Event Information

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From a bureaucratic backwater in the waning days of the Cold War, the fight against global poverty has become one of the hottest tickets on the global agenda. The cozy, all-of-a-kind club of rich country officials who for decades dominated the development agenda has given way to a profusion of mega philanthropists, new bilaterals such as China, "celanthropists" and super-charged advocacy networks vying to solve the world's toughest problems. While philanthropic foundations and celebrity goodwill ambassadors have been part of the charitable landscape for many years, the explosion in the givers' wealth, the messaging leverage associated with new media and social networking, and the new flows of assistance from developing country donors and diasporas together herald a new era of global action on poverty. The new scale and dynamism of these entrants offer hopeful prospects for this continuing fight, even as the new entrants confront some of the same conundrums that official aid donors have grappled with in the past.

On August 1-3, 2007, the Brookings Blum Roundtable gathered representatives reflective of this dynamic landscape to discuss these trends. Through robust discussion and continuing cross-sector partnerships, the conference hopes to foster lasting and widespread improvements in this new field of development.

2007 Brookings Blum Roundtable: Related Materials
	Read the roundtable report - Making Poverty History? How Activists, Philanthropists, and the Public Are Changing Global Development »  Download the participant list » (PDF)  Download the scene setter » (PDF)

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2007 Brookings Blum Roundtable Agenda:

1. Fighting Global Poverty: Who'll Be Relevant In 2020?
   • Matthew Bishop, The Economist, "Fighting Global Poverty: Who'll Be Relevant In 2020?"
   • Homi Kharas, The Brookings Institution, "The New Reality Of Aid"
   • Jane Nelson, Harvard University, "New Development Players And Models"
2. Angelina, Bono, And Me: New Vehicles To Engage The Public
   • Darrell M. West, Brown University, "Angelina, Mia, And Bono: Celebrities And International Development"
   • Joshua Busby, University of Texas, Austin, "Is There A Constituency For Global Poverty? Jubilee 2000 And The Future Of Development Advocacy"
   • Ngozi Okonjo-Iweala, The Brookings Institution, "Nigeria's Fight For Debt Relief: Tracing The Path"
3. Leveraging Knowledge For Development
   • Ashok Khosla, Development Alternatives Group, "Leveraging Knowledge To End Poverty"
   • Eric Brewer, University of California, Berkeley, "Development And Engineering"
4. Social Enterprise And Private Enterprise
   Chaired by: Mary Robinson, Realizing Rights: The Ethical Globalization Initiative
   • J. Gregory Dees, Duke University, "Philanthropy And Enterprise: Harnessing The Power Of Business And Entrepreneurship For Social Change"
5. Africa's Economic Successes: What's Worked And What's Next
   Moderated by: Paul Martin, former Prime Minister of Canada
   Panelists
   • Donald Kaberuka, African Development Bank
   • Ngozi Okonjo-Iweala, The Brookings Institution
6. Effecting Change Through Accountable Channels
   • Jane Nelson, Harvard University, "Effecting Change Through Accountable Channels"
   • Simon Zadek, AccountAbility, "Accountability Compacts: Collaborative Governance For The 21^stCentury"
7. Global Impact: Philanthropy Changing Development
   • Mark R. Kramer, FSG Social Impact Advisors, "Philanthropy, Aid, And Investment: Creating A Common Language"
   • Joseph O'Keefe, The Brookings Institution, "Aid - From Consensus To Competition?"
8. Keynote Address
   • Former Vice President Al Gore, Generation Investment Management

       

       

       

Event Information

On December 5, 2011, the Brookings-LSE Project on Internal Displacement held a private launch event for its report, From Responsibility to Response: Assessing National Approaches to Internal Displacement, which examines government response to internal displacement in fifteen of the twenty countries most affected by internal displacement due to conflict, generalized violence and human rights violations. The analysis presented in the report is based on the first ever systematic use as an assessment tool of the document, Addressing Internal Displacement: A Framework for National Responsibility, developed by the Brookings-Bern Project on Internal Displacement in 2005 to provide guidance to governments in their response to internal displacement.

Roberta Cohen (nonresident senior fellow at Brookings and former co-director of the Project) moderated the event, which featured remarks from the co-authors of the report, Elizabeth Ferris (senior fellow at Brookings and co-director of the Brookings-LSE Project on Internal Displacement), Erin Mooney (senior IDP and protection adviser at the United Nations and former deputy director of the Project) and Chareen Stark (senior research assistant, Brookings-LSE Project on Internal Displacement). In attendance were representatives from the US Department of State and international NGOs, as well as researchers from think tanks and universities.

Cohen opened the event by discussing the background and significance of the Guiding Principles on Internal Displacement. From the very beginning of discussions about internal displacement, there was an emphasis on the fundamental responsibility of national governments to protect and assist those displaced within their territory. And yet over the years there has been an awareness that international actors also have a role to play. She noted the positive strides that have occurred over the past twenty years in regards to government response to internal displacement. Country visits by the UN experts on IDPs—the Representatives of the Secretary-General on IDPs—have been instrumental to improving government response, in some instances leading governments to address internal displacement for the first time. Today, most governments understand their obligations and responsibilities to protect and assist IDPs; the challenge is often translating that understanding into concrete actions.

Elizabeth Ferris gave an overview of the Framework for National Responsibility, which was used to assess government response in each of the fifteen countries in the report (Afghanistan, The Central African Republic, Colombia, the Democratic Republic of the Congo, Georgia, Iraq, Kenya, Myanmar, Pakistan, Nepal, Sri Lanka, Sudan, Turkey, Uganda and Yemen). The Framework outlines twelve minimum steps—or benchmarks—that governments can take to address the protection and assistance needs of internally displaced persons within their territory, from preventing displacement to appointing a focal point on IDP issues, to facilitating the work of the international community. She explained the methodology used in the study and described the challenges the authors faced in conducting the research. For example, basic data on various aspects of government response was lacking in many instances and it was often difficult to determine the impact of a particular government policy in addressing internal displacement. In addition to analyzing the response of the fifteen governments on each of the twelve benchmarks, the study included four extended case studies commissioned for this report: Afghanistan, Georgia, Kenya and Sri Lanka.  Ferris discussed some of the overall findings of the study, noted that the Framework had proven to be a useful assessment tool for examining national responses to displacement, and suggested a number of areas where further research is needed. 

Erin Mooney briefed the audience on benchmark seven—designating an institutional focal point on IDPs—and benchmark ten—supporting durable solutions for IDPs. Mooney noted that designating a governmental focal point for addressing internal displacement is important for clarifying institutional responsibilities and, therefore, for increasing governmental accountability.  Of the 15 countries assessed, all but one had designated a national institutional focal point for addressing internal displacement. She discussed some of the challenges institutional focal points often face, including a lack of funding and a lack of political clout which often challenge their ability to coordinate across government agencies. Benchmark ten, the achievement of durable solutions, was one of the most complex and politicized areas of government action, and is  arguably the one in which government commitment to addressing displacement becomes most apparent. Governments tend to emphasize return as the primary solution to displacement, but, in situations where return has occurred, there is usually little information about whether IDPs have in fact achieved a durable solution. Mooney discussed some of the challenges the fifteen governments faced in finding durable solutions, noting that in none of the countries have durable solutions to displacement been fully achieved.

Chareen Stark discussed the report’s findings on benchmark one—the prevention of arbitrary displacement—and the study’s overall recommendations. Given that the study assessed governments already experiencing large-scale displacement and, in most instances, multiple waves of displacement, Stark said it was obvious that all fifteen governments had failed to prevent displacement. There were three major limitations to governments’ ability to prevent displacement: many of the governments are themselves parties to conflict; many of the governments assessed do not exercise effective sovereignty over all of their territory, due to the presence of nonstate armed actors and/or foreign militaries; and all of the assessed countries face financial and human capacity limitations. She explained that the study found that nearly half of the countries assessed had developed some sort of preventive measures (at least on paper), including several governments that had taken measures to prevent displacement from natural disasters but not conflict. Stark discussed some of these laws, policies and institutional mechanisms as well as the challenges to their effective implementation. She also outlined the report’s recommendations to governments of countries with IDP populations, such as developing and implementing laws and policies in line with the UN Guiding Principles on Internal Displacement and devoting adequate resources at the national and local levels.

Concluding the discussion, the panel responded to questions from the audience on issues such as incentives for governments to address internal displacement using the Framework for National Responsibility and challenges in data reporting and analysis.  Specific questions were also raised on benchmarks five (laws on internal displacement), six (policies on internal displacement), three (designating an institutional focal point for IDPs) and twelve (working with the international community).

Event Materials

• From Responsibility to Response Nov 2011doc

      

       

This year shone a bleak light on the deep racial divides of the U.S. The flash-points of Ferguson, Baltimore and Chicago gave new impetus to movements to reform the criminal justice system and policing. But behind the headlines, the evidence for wide, stubborn race gaps on economic and social indicators is perhaps more troubling still. 

Especially for black Americans, race gaps in family formation, employment, household income, wealth, educational quality, and neighborhood segregation have shown little­—if any—sign of improvement in recent years. The very first Social Mobility Memos was about the barriers to black upward mobility, and in recent months, we have been focusing increasingly on issues of race, place, and opportunity, and here, to close 2015, we recap 15 of our pieces on the subject, including pieces from our colleague Jonathan Rothwell on college, drugs and neighborhoods, and the first Brookings piece from our new nonresident scholar, William Julius Wilson. 

Our hope is that 2016 will see a much greater focus on race and opportunity in America. 

1. Five Bleak Facts on Black Opportunity, Richard V. Reeves and Edward Rodrigue

What would Martin Luther King Jr. think of America in 2015 if he’d lived to see his eighty-sixth birthday? No doubt, he’d be pleased by the legal and political advances of black Americans, crowned by the election and re-election of President Obama.

2. Four charts that show the opportunity gap isn’t going away, Richard V. Reeves

Child poverty rates are coming down slowly, according to figures from the Pew Research Center, except among one racial group: African Americans. This is the latest reminder that the economic gap between black and white Americans is not closing over time. Indeed, on some dimensions, it is widening.

3. Obama’s Post-Presidency? Tackling the Social Mobility Challenge for Black Men, Richard V. Reeves

President Obama’s initiative to boost opportunities for young black men—My Brother’s Keeper—looks to be a post-presidential plan, as much as presidential one. Valerie Jarrett, his closest aide, said that it was a vocation the president and first lady Michelle Obama will undertake “for the rest of their lives…That’s a moral, social responsibility that they feel will transcend the time that he’s president.”

4. School readiness gaps are improving, except for black kids, Richard V. Reeves

Between 1998 and 2010, inequality in school readiness—in terms of math, reading, and behavior—declined quite significantly, according to Reardon and Portilla’s analysis of ECLS data, being presented today at the Association for Public Policy Analysis and Management Annual Conference. This positive trend can be seen for gaps in both income and race (or at least, for Hispanic-white differences).

5. Rich Neighborhood, Poor Neighborhood: How Segregation Threatens Social Mobility, Patrick Sharkey

Racial segregation in American cities has declined slowly, but steadily over the past four decades. This is good news. Over the same timeframe, however, the level of economic segregation has been rising. Compared to 1970, the rich are now much more likely to live in different communities than the poor.

6. Segregation and concentrated poverty in the nation’s capital, Stuart M. Butler and Jonathan Grabinsky

The social mobility gap between black and white Americans has barely narrowed in the last decades, and sharp differences in access to opportunity persist. This racial opportunity gap can, in part, be traced back to the neighborhoods where whites and blacks grow up: research from urban sociologists like Patrick Sharkey and Robert Sampson shows the damaging effects racial segregation and concentrated neighborhood poverty can have on children’s life chances. Washington, D.C. is a case in point.

7. The other side of Black Lives Matter, William Julius Wilson

Several decades ago I spoke with a grieving mother living in one of the poorest inner-city neighborhoods on Chicago’s South Side. A stray bullet from a gang fight had killed her son, who was not a gang member. She lamented that his death was not reported in any of the Chicago newspapers or in the Chicago electronic media.

8. Guns and race: The different worlds of black and white Americans, Richard V. Reeves and Sarah Holmes

“The nation’s consciousness has been raised by the repeated acts of police brutality against blacks. But the problem of public space violence—seen in the extraordinary distress, trauma and pain many poor inner-city families experience following the killing of a family member or close relative—also deserves our special attention.”

9. Measuring the Racial Opportunity Gap, Richard V. Reeves and Quentin Karpilow

The U.S. is sharply divided by race, not least in terms of the opportunities for children—a point that a new report from the Annie E. Casey Foundation vividly shows. At every life stage, there are gaps between kids of different colors.

10. How the War on Drugs Damages Black Social Mobility, Jonathan Rothwell

The social mobility of black Americans has suffered collateral damage from the “War on Drugs.” Being convicted of a crime has devastating effects on the employment prospects and incomes of ex-felons and their children, as my Brookings colleagues and other scholars have found. These findings are often used to motivate efforts to reduce criminal behavior. They should also motivate changes in our criminal justice system, which unfairly punishes black Americans—often for victimless crimes that whites are at least as likely to commit.

11. Black Students at Top Colleges: Exceptions, Not the Rule, Jonathan Rothwell

A generation has been lost in the journey towards race equality in terms of income. The income gap between blacks and whites has been stuck since 1980. Why? Dozens of factors count, of course, but one in particular is worth further exploration: the underrepresentation of black students in elite colleges. As I noted in a previous blog, this could help to explain why blacks earn less than whites, even in the same occupation and with the same level of education.

12. The stubborn race and class gaps in college quality, Jonathan Rothwell

Increasing the number of low-income adults going to—and through—college is an important step towards greater social mobility and reduced income inequality. College is also an important tool for tackling race gaps. But the challenge is not just about quantity: college quality counts for a good deal, too.

13. Single black female BA seeks educated husband: Race, assortative mating and inequality, Edward Rodrigue and Richard V. Reeves

There is a growing trend in the United States towards assortative mating—a clunky phrase that refers to people’s tendency to choose spouses with similar educational attainment. Rising numbers of college-educated women play a key role in this change. It is much easier for college graduates to find and marry each other when there are more equal numbers of each gender within an educational bracket.

14. Sociology’s revenge: Moving to Opportunity (MTO) revisited, Jonathan Rothwell

Neighborhoods remain the crucible of social life, even in the internet age. Children do not stream lectures—they go to school. They play together in parks and homes, not over Skype. Crime and fear of crime are experienced locally, as is the police response to it.

15. Space, place, race: Six policies to improve social mobility, Richard V. Reeves and Allegra Pocinki

Place matters: that’s the main message of Professor Raj Chetty’s latest research. This supports the findings of a rich body of evidence from social scientists, but Chetty is able to use a large dataset to provide an even stronger empirical foundation. Specifically, he finds that children who move from one place to another have very different outcomes, depending on whether they move to a low-opportunity city or a high-opportunity one.

      

       

       

Executive Summary

The Millennium Challenge Corporation (MCC) is one of the outstanding innovations of the eight-year presidency of George W. Bush. No other aid agency—foreign or domestic—can match its purposeful mandate, its operational flexibility and its potential muscle.

In the first year after it became operational in May 2004, however, the MCC made a number of mistakes from which it has not fully recovered. It also had the bad luck of facing an increasingly tight budget environment as its performance improved.

The MCC may not survive as an independent agency. Critics have advocated closing it down, while many supporters of foreign assistance reform would maintain the MCC program but consolidate it with the Agency for International Development and the President’s Emergency Plan for Aids Relief under a single individual with broad development responsibilities.

In our assessment, one of the singular achievements of this innovation is the “MCC effect”: steps taken by a number of countries to improve their performance against the MCC’s objective indicators in order to become eligible for an MCC compact.

We conclude that the MCC is moving steadily to fulfill its potential of being the world's leading "venture capitalist" focused on promoting economic growth in low-income countries. The Obama administration can realize this potential by affirming the MCC's bold mandate, strengthening its leadership, and boosting its annual appropriations to at least $3 billion beginning in FY 2010.

Policy Brief #167

A Rough Start

The Millennium Challenge Corporation started off in the wrong direction in 2004. New leadership a year later put the MCC back on track. Unfortunately, however, the MCC has not been able to recover quickly enough from its early mistakes to compete successfully for funding in the face of increasingly severe government-wide budget constraints. After more than four years of operation, it has not yet achieved “proof of concept.” As a result, its future as an independent agency is in jeopardy.

The Concept

In March 2002, six months after the 9/11 terrorist attacks, President George W. Bush announced a commitment to increase U.S. aid to low-income countries by $5 billion per year, representing a jump of 50 percent from the baseline level of official development assistance (ODA).

More remarkable than the size of the commitment was the nature of the commitment. It would not be more of the same. It would be better. It would reward good performance by focusing exclusively on poor countries implementing sound economic development and poverty reduction strategies, as reflected in objective indicators. It would achieve measurable results.

President Bush’s initial concept did not specify the organizational form of the new program. Instead of putting it under the State Department or Agency for International Development (USAID), President Bush opted for creating a special-purpose government corporation—the Millennium Challenge Corporation—to run the program.

Conception turned out to be the easy part. It took almost a year for the administration to send legislation proposing the MCC to Congress, and it took another year for the Congress to send authorizing legislation to the president.

While the purity of the MCC concept was compromised significantly in the process of obtaining enough votes in Congress to establish it, six key elements were preserved: rewarding good performance; country ownership; measurable results; operational efficiency; sufficient scale at the country level to be “transformational”; and global commitments at the rate of $5 billion per year.

The Record

Perhaps the biggest mistake in the MCC’s first year of operations was a failure to develop a good working relationship with the U.S. Congress. Some staffing choices gave the impression that the MCC had no interest in the experience and expertise that existed in USAID, the multilateral development banks and NGOs working in low-income countries. In retrospect, a third problem may have been starting compact negotiations with more than a dozen countries instead of building its portfolio of compact countries more slowly and carefully.

Paul Applegarth resigned as CEO in June 2005 and John Danilovich took over the following October. At that point, compacts had been signed with five countries. Funding problems were already visible. Against the original proposal seeking a combined $4.6 billion for the first two start-up years (reaching the target $5 billion in FY 2006), the budget request added up to only $3.8 billion, Congress authorized only $3.6 billion, and appropriations only reached $2.5 billion.

For the next three years, FY 2006 – FY 2008, the administration’s budget request for the MCC was straight-lined at $3 billion. Appropriations peaked in FY 2006 at $1.77 billion, and then slipped to $1.75 billion in FY 2007 and $1.482 billion in FY 2008 (after an across-the-board rescission). Thirteen more compacts were signed, bringing the total number of compact countries to 18. In addition, threshold agreements totaling $361 million were being implemented in 14 countries. At the end of FY 2008, cumulative MCC appropriations were $7.5 billion, and cumulative compact commitments were $6.3 billion.

As the Bush administration winds down and the Obama administration gears up, the MCC is in an awkward situation. It has recovered from its start-up problems and now has significant support in Congress and the development community. The evidence of an “MCC effect” is particularly notable. The compact countries are fans of the program, and other potentially eligible countries appear eager to conclude compacts.

However, the “measurable results” promised to an impatient Congress have not yet materialized. Since the first compact will not reach the end of its original four year lifespan until July 2009, it is too early to expect such results. Still, enough questions about the effectiveness of the MCC have been raised to strengthen the position of skeptics in the Congress.

A moment of truth is approaching. Assuming FY 2009 funding remains capped by continuing resolutions at a level no higher than $1.5 billion, the MCC will not be able to conclude more than three compacts averaging $400 million each during this fiscal year. While a strong case can be made for an independent aid agency operating at the rate of $5 billion per year, a rate of $1-$1.5 billion per year for a stand-alone agency is not so easy to justify. Meanwhile, an important coalition of foreign aid advocates sees the change of administration as an opportunity to consolidate a wide range of development and humanitarian assistance programs, including the MCC, into a single agency or cabinet-level department.

Findings and Recommendations

Our assessment of the MCC at the end of FY 2008 focuses on six operational issues and ends with a recommendation to the Obama administration. (The full assessment is in our working paper “The Millennium Challenge Corporation: An Opportunity for the Next President.”)

1. Objective indicators. From the outset, objective indicators of country performance have been at the core of the MCC approach to development assistance. The concept is simple: the MCC will provide funding to countries that excel against performance indicators in three areas: ruling justly, investing in people and providing economic freedom. Selecting countries is not so simple.

The MCC’s 17 indicators of country performance are state of the art. But they are not embedded in concrete. The MCC has been pushing hard for improvements. A number of the independent providers of these indicators have tightened their procedures and methodology, and others have shortened the time between data collection and dissemination. The publication of updated country “scorecards” on the MCC Web site each year provides an unprecedented level of visibility linking country performance to donor assistance. In general, the MCC’s indicators have met broad approval in the donor community.

The “MCC effect” has been the most important benefit of these indicators. The MCC’s indicators provide a comprehensive, objective and highly visible system for comparing a country with its peer group and showing where its performance falls short. One academic study found that eligible countries improved their indicators significantly more after the MCC was established than in the pre-MCC period, and that eligible countries improved their indicators significantly faster than developing countries not eligible for compacts.

The MCC’s objective indicator approach has been very successful. Still, it is important to recognize certain inherent limitations. Four are worth singling out:

• The majority of the measures used to measure performance are available only with a time lag.
• The indicators reveal relative performance, not absolute performance. Good performers on the basis of the indicators still face daunting challenges.
• Even a top performing country is likely to see its ranking slip on one of the indicators at some point during compact implementation. This can create a credibility problem for the program even when the underlying trend is positive.
• Measuring corruption is especially problematic. The corruption indicator is probably state of the art, but corruption has many elements, and there is no agreement on which weights to assign to each one.

Recommendation: Retain and continue to refine the objective indicators.

2. Country selection. Initially, the MCC was limited to funding low-income countries. Since FY 2006, the MCC has been able to commit up to 25 percent of its resources to lower-middle-income countries. For FY 2008, these were countries with annual per capita incomes between $1,736 and $3,595. Together, the two groups included 95 countries.

The MCC board reviews country scorecards once a year and decides which countries to add to the eligibility list. Selection is not automatic based on the indicators. The board considers a wide range of political, economic and social factors.

The MCC’s overall track record in selecting countries is good but not brilliant. At the end of FY 2008, there were 18 countries with signed compacts, five threshold countries that had been declared eligible for compacts, and three additional countries declared eligible that were not in the threshold program. The few selections that have been criticized are cases where political factors might have tipped the balance in favor of the country.

Most of the selected countries have small populations, perhaps because it is easier to be transformational in a small country. Even large countries, however, have poor regions and a case can easily be made that the MCC might have a greater impact by focusing on one poor region in a large country like India or Indonesia than on one entire microstate like Vanuatu.

Recommendation: As long as the MCC’s funding level remains below $2 billion per year, stick with the current approach to selection but avoid new cases where political factors appear to be overriding performance indicators. At higher funding levels, give greater weight to improvements in absolute performance so that the indicators will not be a constraint to adding countries and enlarging the MCC’s impact.

3. Compact design. Compact design can be broken down into four elements: preparation, size, content and choice of partner. One of the hallmarks of the MCC approach to development assistance is an exceptional degree of participation by the host country government and civil society. In a relatively short time, the MCC approach to country ownership has set a high standard to which other donor agencies should aspire.

Compact size is seriously constrained by the statutory five-year limit on the length of a compact and by the prohibition against concurrent compacts. The limit leads to unrealistic expectations: anyone who believes a five-year program can be transformational does not understand development. The inability to have concurrent compacts has led the MCC to bundle together activities that would better be pursued separately. Within these constraints, compact size so far is defensible.

Regarding content, one early criticism of the MCC centered on its bias toward infrastructure projects. Agriculture and infrastructure were the clear priorities at the outset, based on partner-country priorities. These two sectors still account for more than half of all MCC funding, but attention to other sectors has grown. For example, funding for education was absent from the first 10 compacts, but was present in five of the next eight.

This evolution may reflect congressional pressure to be active in the social sectors despite evidence that more investment to expand productive capacity and lower costs could have a greater poverty reduction payoff.

The MCC has also shied away from non-project funding (budget support), which has the advantages of being fast-disbursing, having very low overhead costs and avoiding performance failure by rewarding countries for results recently achieved. Similarly, the MCC has yet to use its considerable ability to leverage funding from private investors, especially for infrastructure projects.

On partnership, all of the compacts to date have been with national governments even though the MCC has the authority to enter into compacts with regional/municipal authorities and private sector parties such as NGOs. With this narrow focus, the MCC is probably missing some opportunities to have a bigger impact.

Our major concern is that the design of the 18 compacts concluded so far reflects very little innovation. They can be characterized as collections of the kinds of development interventions that USAID, the World Bank and other donors have been undertaking for decades. Perhaps in the attempt to overcome its early start-up problems and minimize congressional criticism, the MCC has been too risk averse.

Recommendation: Immediately remove the prohibition against concurrent compacts that is a disincentive to improving performance. Allow the MCC to extend compacts beyond five years when unanticipated complications arise. Provide encouragement from the White House and Congress to be more innovative in compact design.

4. Compact implementation. No MCC compacts have been completed, so assessment of their impact is premature. One problem is the lag from the date of compact signing to the date of its entry into force, which has lengthened from about three months for the first three compacts to 10 months for the 10th and 11th compacts. This reflects the MCC’s tactical decision to delay entry into force until the legal framework is in place and the implementing organization is up and running. The normal process of tendering for infrastructure projects accounts for some of the slowness, and bad luck has also created recent problems in the form of unanticipated increases in fuel and commodity costs.

The choice of an appropriate local implementing agency is both difficult and critical to success. The objectives of country ownership and capacity building/institutional development argue for selecting an existing government ministry or agency. Realities on the ground have led the MCC typically to establish a special-purpose organization (“accountable entity” in the MCC’s jargon). In effect, the MCC has promoted strict accountability at the expense of building partner-country capacity.

The MCC’s approach to monitoring and evaluation is a source of pride, but it could become the program’s Achilles’ heel. The MCC’s recent decision to make public the “economic rate of return” analysis for each new compact puts it at the head of the donor community. Other donor agencies have been unwilling to take this step, except in a more opaque form. A potentially critical problem with the MCC’s approach is latent in the micro performance benchmarks established for each compact. It seems likely that the results will be mixed at the end of most of the compacts. Given the high expectations created for the MCC’s impact, the failure to show superior results could undermine congressional support for the MCC going forward.

Finally, the MCC has largely lived up to its billing as a lean organization. It is now fully staffed at its ceiling of 300 positions. The MCC’s field offices, established after compact signing, are typically limited to two positions.

Recommendation: Continue to refine implementation techniques to the point of becoming a pace-setter and develop performance benchmarks that are less likely to generate disappointment.

5. Threshold Programs. The MCC has committed some $360 million to 16 “threshold” countries. Nearly all of these programs are managed by USAID. Two different visions seem to coexist. One vision is to prepare countries for a compact within a year or two. A second vision is to address a particular “target of opportunity” that will help a country qualify for a compact eventually. It is too soon to say how effective these programs have been under either approach.

However, the individual projects funded under the threshold programs have been indistinguishable from the typical USAID project involving a contract with an American firm to field a team of expatriate advisors focusing on a particular sector. A fundamental problem with the threshold programs is that they give the impression of trying to boost performance scores by short-term actions rather than rewarding the kind of self-generated progress that is more likely to be sustainable.

Recommendation: As long as MCC funding remains below $2 billion per year, shift funding of threshold programs to USAID funding. This will help to ensure that the activities being funded are of high value, and encourage USAID to take a more strategic approach to its operations in low-income countries.

6. Governance. The MCC legislation created a board of directors with five ex officio members and four private sector members. Having private sectors members on the board is one of the great strengths of the MCC, enhancing its objectivity and credibility, helping to ensure bipartisan support, and providing strategic links to the broader development community. By comparison to the boards of other government corporations, the MCC board is small in size and more biased toward public-sector members. Having the secretary of state chair the board weakens the image of the MCC as an agency focused on long-term development.

Recommendation: Amend the MCC legislation to add four more private sector members to the MCC board, allow the board to elect one of its private sector members as chairman.

The Existential Issue.

Although the MCC has not yet lived up to its promise, it still has the potential of offering the biggest bang for the buck among all U.S. development assistance programs. Six features are not only worth keeping but strengthening further: rewarding good performance; using objective indicators to guide the selection of countries; focusing on low-income countries; achieving a high degree of country ownership; avoiding earmarks and time limits on spending authority; and keeping staff small.

However, the current operating level of less than $2 billion per year is far below the original concept. Retaining a separate agency for such a small program within a much larger bilateral assistance program is questionable. With funding moving toward the pace of $5 billion per year, and with added authority to have concurrent compacts, the MCC can be more innovative and more transformational.

The MCC has the potential of being the world's leading "venture capitalist" focused on promoting economic growth in low-income countries. As a core component of a foreign policy that relies more on partnership with other countries, the Obama administration can realize this potential by affirming the MCC's bold mandate, strengthening its leadership, and boosting its annual appropriations to at least $3 billion beginning in FY 2010.R. Kent Weaver is a Senior Fellow in Governance Studies at the Brookings Institution and a Professor of Public Policy and Government at Georgetown University. He is the author of the forthcoming book Reforming Social Security: Lessons from Abroad.

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Lex Rieffel is a nonresident senior fellow in Brookings's Global Economy and Development program. He is a former U.S. Treasury official and teaches a graduate course at George Washington University.

James W. Fox, formerly chief economist for Latin America at USAID, is an economic consultant.