U.S. Foreign Assistance and Corruption: It’s All Relative

This is a joint post with Sarah Jane Staats.Corruption remains a major concern of foreign aid policymakers. The Millennium Challenge Corporation (MCC) was created, in part, to address this concern by working with well-governed, poor countries that must pass a control of corruption indicator. This also means the MCC is held to a higher standard and is often the first aid agency forced to respond to corruption concerns. Our message to the policymakers: keep in mind that corruption, especially in poor countries, is relative.Reps. Nita Lowey (D-NY) and Ileana Ros-Lehtinen (R-FL) raised concerns about corruption with MCC CEO Daniel Yohannes in recent hearings before the House foreign aid appropriators and authorizers. Both Lowey and Ros-Lehtinen are right to focus on corruption and to have concerns especially in MCC countries. But it is important to unpack what corruption means in—and across—developing countries to calibrate responses to these concerns.Development is risky business. By its very nature, it takes place in the least-developed countries with the least-developed institutions, infrastructure and economies.  To think that there is a low income country with zero corruption to which the United States can provide aid is foolish; it doesn’t exist at the high end of the income scale either. (In addition to many others, Bermuda and Uruguay both score better than the United States on control of corruption this year.)The question is whether the MCC is investing in countries with relatively better records of controlling corruption. Let’s compare each of the 21 MCC compact countries with a country in the same region with a similar gross national income (GNI) per capita.  Seventeen of the 21 MCC countries currently score better on control of corruption than their comparators, and 14 of the 21 countries have had better corruption scores than their comparators for the past six years.  (Complete results here.)To illustrate, here are examples of MCC and similar, non-MCC countries from sub-Saharan Africa, Eurasia, and Latin America.  (Each country’s 2009 income/capita is in parentheses.)MCC countries are doing relatively better (by a lot in some cases) than their regional comparators.Even Senegal, abuzz in the media and congressional hearings over corruption concerns, stands above its West African neighbors Mauritania, Nigeria, and Cote d’Ivoire, and continues to score in the 74^th percentile of all low income countries (passing the MCC indicator handily).But Senegal’s control of corruption scores are declining; it fell from 70 in 2006 to 105 in 2010 in Transparency International’s index. The trends are cause for concern and while the MCC is taking all the right steps to ensure no MCC funds are misused, the agency faces a perception problem as it continues to operate in a country that has high-level, visible (and growing) corruption scandals.As MCC CEO Daniel Yohannes said in his testimony to the House State and Foreign Operations Subcommittee, “working with some of the poorest countries in the world means working with countries that struggle with policy performance, including corruption.”  MCC countries will never have zero corruption.  But the MCC should continue to support countries with relatively low levels of corruption and good policies to continue these positive trends.

Note: Control of Corruption scores come from the Worldwide Governance Indicators (WGI), a joint project of the Brookings Institution and the World Bank. The indicator measures the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests. It also measures the strength and effectiveness of a country’s policy and institutional framework to prevent and combat corruption.  This indicator measures perceptions of corruption and has a time lag of two years.