Decades of massive development assistance have failed to spur economic growth in the poorest countries.Worse, development aid has often served to prop up failed policies, relieving the pressure for reform and perpetuating misery. Results of aid are typically measured in dollars spent by donors, not in the rates of growth and poverty reduction achieved by recipients. These are the indicators of a failed strategy.

Working with other nations, the United States is confronting this failure.We forged a new consensus at the U.N. Conference on Financing for Development in Monterrey that the objectives of assistance—and the strategies to achieve those objectives—must change.

This Administration’s goal is to help unleash the productive potential of individuals in all nations. Sustained growth and poverty reduction is impossible without the right national policies. Where governments have implemented real policy changes, we will provide significant new levels of assistance. The United States and other developed countries should set an ambitious and specific target: to double the size of the world’s poorest economies within a decade.

The United States Government will pursue these major strategies to achieve this goal:

• Provide resources to aid countries that have met the challenge of national reform. We propose a 50 percent increase in the core development assistance given by the United States.While continuing our present programs, including humanitarian assistance based on need alone, these billions of new dollars will form a new Millennium Challenge Account for projects in countries whose governments rule justly, invest in their people, and encourage economic freedom. Governments must fight corruption, respect basic human rights, embrace the rule of law, invest in health care and education, follow responsible economic policies, and enable entrepreneurship. The Millennium Challenge Account will reward countries that have demonstrated real policy change and challenge those that have not to implement reforms.
• Improve the effectiveness of the World Bank and other development banks in raising living standards. The United States is committed to a comprehensive reform agenda for making the World Bank and the other multilateral development banks more effective in improving the lives of the world’s poor.We have reversed the downward trend in U.S. contributions and proposed an 18 percent increase in the U.S. contributions to the International Development Association (IDA)—the World Bank’s fund for the poorest countries—and the African Development Fund. The key to raising living standards and reducing poverty around the world is increasing productivity growth, especially in the poorest countries.We will continue to press the multilateral development banks to focus on activities that increase economic productivity, such as improvements in education, health, rule of law, and private sector development. Every project, every loan, every grant must be judged by how much it will increase productivity growth in developing countries.
• Insist upon measurable results to ensure that development assistance is actually making a difference in the lives of the world’s poor. When it comes to economic development, what really matters is that more children are getting a better education, more people have access to health care and clean water, or more workers can find jobs to make a better future for their families.We have a moral obligation to measure the success of our development assistance by whether it is delivering results. For this reason, we will continue to demand that our own development assistance as well as assistance from the multilateral development banks has measurable goals and concrete benchmarks for achieving those goals. Thanks to U.S. leadership, the recent IDA replenishment agreement will establish a monitoring and evaluation system that measures recipient countries’ progress. For the first time, donors can link a portion of their contributions to IDA to the achievement of actual development results, and part of the U.S. contribution is linked in this way.We will strive to make sure that the World Bank and other multilateral development banks build on this progress so that a focus on results is an integral part of everything that these institutions do.
• Increase the amount of development assistance that is provided in the form of grants instead of loans. Greater use of results-based grants is the best way to help poor countries make productive investments, particularly in the social sectors, without saddling them with ever-larger debt burdens. As a result of U.S. leadership, the recent IDA agreement provided for significant increases in grant funding for the poorest countries for education, HIV/AIDS, health, nutrition, water, sanitation, and other human needs. Our goal is to build on that progress by increasing the use of grants at the other multilateral development banks.We will also challenge universities, nonprofits, and the private sector to match government efforts by using grants to support development projects that show results.
• Open societies to commerce and investment. Trade and investment are the real engines of economic growth. Even if government aid increases, most money for development must come from trade, domestic capital, and foreign investment. An effective strategy must try to expand these flows as well. Free markets and free trade are key priorities of our national security strategy.
• Secure public health. The scale of the public health crisis in poor countries is enormous. In countries afflicted by epidemics and pandemics like HIV/AIDS, malaria, and tuberculosis, growth and development will be threatened until these scourges can be contained. Resources from the developed world are necessary but will be effective only with honest governance, which supports prevention programs and provides effective local infrastructure. The United States has strongly backed the new global fund for HIV/AIDS organized by U.N. Secretary General Kofi Annan and its focus on combining prevention with a broad strategy for treatment and care. The United States already contributes more than twice as much money to such efforts as the next largest donor. If the global fund demonstrates its promise, we will be ready to give even more.
• Emphasize education. Literacy and learning are the foundation of democracy and development. Only about 7 percent of World Bank resources are devoted to education. This proportion should grow. The United States will increase its own funding for education assistance by at least 20 percent with an emphasis on improving basic education and teacher training in Africa. The United States can also bring information technology to these societies, many of whose education systems have been devastated by HIV/AIDS.
• Continue to aid agricultural development. New technologies, including biotechnology, have enormous potential to improve crop yields in developing countries while using fewer pesticides and less water. Using sound science, the United States should help bring these benefits to the 800 million people, including 300 million children, who still suffer from hunger and malnutrition.