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  • Publications:  MCC@20: The Capstone
  • October 2024

Trends in the Global Development Landscape

The Past 20 Years

MCC was created at the turn of the millennium to reduce global poverty through economic growth. Created by the U.S. Congress and established in January 2004 with strong bipartisan support, MCC was designed to embody the prevailing aid effectiveness principles of country ownership, a data-driven focus on results, inclusive partnerships, transparency, and mutual accountability. Since its founding, MCC has established proof of concept of its model by delivering measurable results and sustainable impact. MCC has evolved from an experiment in aid effectiveness to an example of excellence. In doing so, MCC has invested over $16 billion in roughly 80 programs, which is expected to benefit almost 400 million people in roughly 50 countries across six continents.

MCC has consistently taken a long view of economic development — making investments now to achieve inclusive growth in the future. MCC does this by working collaboratively with partner countries and supporting their key growth sector priorities. Additionally, MCC’s standard of accountability for results requires comprehensive assessment and evaluation of all programs. This foundation is what makes MCC unique and effective in addressing the economic challenges jointly identified with partner countries. While the world changes, the MCC model is built to adapt to emerging global trends that impact economic development.

The Current Moment

Global trends continue to emerge and change the development landscape. Among these are the changing nature of poverty and inequality, a global democratic recession, extreme weather events, unprecedented technological advancement, rapid urbanization, and unsustainable debt in many partner countries. The MCC model maintains its relevance over time by adapting and evolving in response to global trends. MCC expects to pay increased attention to the following key areas as country partners continue to grapple with these challenges moving forward.

Persistent global poverty

Economic growth and poverty reduction have been far too slow in recent years. After an unprecedented convergence with high-income countries around the turn of the millennium, lower-income countries are once again falling behind. While the number of people living in extreme poverty has decreased by more than one billion since 2000, the rate of global poverty reduction slowed considerably around 2015. Progress on both global poverty and inequality then reversed during the pandemic. The resumption of progress has remained slow due to an uneven economic recovery, Russia’s war of aggression in Ukraine, and other unexpected shocks. Global gender gaps also remain significant with women making about 77 cents for every dollar that men make with fewer than two thirds of the legal rights3. MCC’s goal is to reduce poverty through economic growth, and that requires economic growth that is inclusive, gender-equitable, and sustainable. The agency is committed to routinely and systematically expanding opportunities for structurally disadvantaged groups to access, participate in, and benefit from MCC investments.

Democratic backsliding

For the first time in two decades, more people live under authoritarian rule than democratic rule. Democratic backsliding is occurring even in established democracies. This is troubling for MCC’s mission of poverty reduction through economic growth, as democracy has been shown to be good for growth4. MCC maintains its commitment to helping democracies to deliver for their people by selectively partnering with countries that demonstrate a commitment to democratic principles. MCC’s model creates incentives for potential partner countries to institute reforms that can help deliver economic benefits and bolster democratic institutions.

Environmental change

Shocks and stresses associated with changing weather patterns pose severe threats to economic growth. At the individual level, vulnerable populations generally live in areas with more frequent extreme weather events and work in sectors with greater related economic impacts. In addition, they have the least ability to adapt to and recover from the damage caused by natural disasters. Building resilient economies is critical to helping developing countries deal with extreme weather events and other environment-related constraints to growth. In response to growing demand from partner countries to focus on building resilience to these shocks, MCC will continue to integrate these considerations into all stages of program development and implementation.

Technology and digitalization

The digital economy has been growing at a rate twice that of global growth and is expected to represent 30 percent of the global economy by 20305. However, a substantial digital divide exists in digital skills and access to digital infrastructure by underserved and marginalized populations that limits their economic potential. MCC partner countries’ readiness to join the digital economy as part of their growth strategy is pertinent to MCC’s model of addressing constraints to growth now and in the future. As a result, MCC has seen growing demand for digital investments, and this issue area has become an increasingly important part of its portfolio.

Rapid urbanization

Today, over 57 percent of the world’s population lives in urban areas, and by 2050, the UN projects that urban populations will exceed two thirds of the global population6. Africa, a historical focus of MCC programs, will see its urban population nearly triple by 2050 by adding about 800 million people. Well-functioning and productive urban economies are essential to nation-wide growth, and MCC has a long history of investing in urban-led growth. Roughly one third of MCC’s investments have been in urban settings. For example, the Mongolia Water Compact aims to provide a sustainable supply of water to the capital city of Ulaanbaatar to address an impending water crisis. In addition, the Kenya Urban Mobility and Growth Threshold Program was signed in September 2023 and will focus on congestion in the capitol city of Nairobi through integrated transport planning and land use planning. The program is part of a broader U.S. commitment in the 2022 U.S. Strategy toward sub-Saharan Africa to “help African cities plan for their growth.” MCC will continue to designs its programs to balance the needs of both urban and rural populations.

Mounting debt

High levels of debt and elevated interest rates have made borrowing more expensive and strained public finances. For many countries, the combination of tighter financial conditions, exchange rate depreciations, and higher inflation have led to difficult monetary and fiscal policy trade-offs. For instance, the average low-income country spends more on debt servicing than social assistance or health7. This also limits countries’ ability to make pro-growth investments such as economic infrastructure. Austerity measures can further strain political stability and increase the potential for a negative cycle of instability, slow growth, and persistent poverty. One of MCC’s investment criteria for any project is to ensure sustainability long after interventions have been completed, but high debt levels can negatively affect whether a partner country is able to maintain an infrastructure asset. MCC will continue to help its partner countries maintain sustainable debt levels by reforming utilities while improving service delivery, mobilizing domestic revenues while reforming procurement practices, catalyzing private investment, and only providing grants, not loans.

The challenges of tomorrow

MCC has a history of being ahead of the curve. The MCC model focuses on prioritizing each country’s greatest development challenges by assessing the economic conditions and identifying cost-effective solutions. This often leads to a focus on emergent challenges.

For instance, MCC began developing the Zambia Compact in 2008 to address urban water issues in Lusaka just as the global urban population first exceeded the global rural population. MCC had a robust portfolio of agricultural programs when Feed the Future was launched in 2009, and an emerging set of energy-focused programs to support the Power Africa initiative shortly thereafter. MCC was well into implementing the Philippines Revenue Administration and Reform Project as the Addis Tax Initiative was launched in 2015. Multiple MCC programs were already addressing women’s employment and entrepreneurship when the Women’s Global Development Prosperity Initiative launched in 2019, and MCC was already heavily invested in economic infrastructure when the Partnership for Global Infrastructure and Investment launched in 2021.

These are not coincidences. At 20 years, MCC has a substantial track record of being a highly adaptable agency with a focus on tailored solutions that deliver outsized development impact for the economic challenges of today and tomorrow. MCC has proven time and again that the MCC model can stand up to and even anticipate the challenges of the future. MCC is equipped with the learning and capabilities to make a meaningful impact as it continues to be responsive to the needs of partner countries in a continuously changing global development landscape.