Applying Conditionality to Development Assistance

he announcement on 6 May 2004 by the Millennium Challenge Corporation (MCC) of the 16 countries eligible to receive funding under the Bush Administration’s Millennium Challenge Account (MCA) is a key step in the process of determining the direction of development assistance by applying quantitative international comparators to the governance performance of developing countries. It is the latest in a series of conditionality strategies aimed at making aid ‘effective’. It is also the most sophisticated in terms of quantification of the eligibility conditions, giving the impression that the direction of aid flows has moved into a scientific direction of applying solid statistical information in a formulaic manner, thus making the system both transparent and reliable. The MCA process has the advantage of learning from previous experience, but whether it will be able to ‘solve’ the problem remains in doubt. This paper looks at the context for this initiative by tracing some of the key historical episodes shaping development assistance in an attempt to understand the increasing reliance on conditionality. A broad taxonomy of conditionality is proposed. The paper also examines the MCA process to date, looking at the growth of, and reliance on, statistical comparators as the critical decision-making tool. It concludes with some thoughts on the place of conditionality in development assistance and the place of statistics in conditionality. It is not within the aims of this paper to comment on, or attempt a measurement of, the effectiveness of aid. This is one of the big questions in development assistance. Recent work demonstrates the need for far greater care in tackling this issue and, in particular, the need to disaggregate emergency aid, institution-building aid delivering benefits over the longer term, and aid intended to stimulate growth in the shorter term (Clemens, Radelet and Bhavnani, 2004). While the debate on aid effectiveness continues, the working assumption in the development assistance community is that improvements in direction and delivery are necessary. Conditionality continues to be a key part of the formula.