On July 14, the West African nation of Burkina Faso signed a compact that will bring it nearly $481 million in U.S. aid, but there’s a catch: funding is tied to the nation’s ability to show it is committed to improving governance, encouraging economic freedoms and investing in its citizens to reduce poverty by promoting growth.

Since its creation in 2004, the U.S. Millennium Challenge Corporation (MCC) has approved $6.2 billion in compacts with 16 other countries: Madagascar, Cape Verde, Honduras, Nicaragua, Georgia, Armenia, Vanuatu, Benin, Ghana, Mali, El Salvador, Mozambique, Lesotho, Morocco, Mongolia and Tanzania.

The program embodies the Bush administration’s “steadfast commitment to global development, to ending the scourge of poverty that robs communities of hope and opportunity,” Secretary of State Condoleezza Rice said at the July 14 signing ceremony.

Steve Radelet, in an essay published by Center for Global Development (PDF, 184 KB), summarizes the MCC approach as follows:

“Once countries qualify, the recipient countries set priorities, design the programs to be funded and implement them. This approach places much more responsibility for development programs with the recipient country. In return for this flexibility, the MCC – in theory – demands greater accountability for achieving results, including being willing to cut off funding when programs fail.”

The MCC process sets metrics to measure the effectiveness of the aid. The program is so new that there are insufficient data as yet to draw conclusions, but the most recent MCC report on Madagascar, party to the first MCC compact on March 14, 2005, gives cause for optimism:

“[E]conomic growth in Madagascar picked up and GDP growth accelerated to 6.1% in 2007. This was mostly due to prudent macroeconomic policies, ongoing construction of large mining projects and progress in structural reforms. Inflation slowed to single digits and averaged 8.2% by the end of December 2007.”

Radelet, who holds a doctorate in public policy from Harvard University, calls MCC a significant accomplishment but asserts deeper reforms are needed, and lays out a number of possible approaches to revamping the entire system.

“The United States can and should do a much better job of getting the right kind of assistance in the right amounts to the right countries to fight poverty, address some of the root causes of state failure, and support democracies around the world.

Should international assistance be linked to a country’s progress in political and economic reforms? Is that an effective way to promote democracy and good governance?

Survey data collected by the Brookings Institution, a Washington research and policy-development organization, suggests Arab public opinion supports a two-state solution to the Palestinian-Israeli conflict, but most Arabs don’t believe it can happen.

In a survey of 4,046 people in Egypt, Saudi Arabia, the United Arab Emirates, Morocco, Lebanon and Jordan, 73 percent said they accepted in principle an independent Palestine living side-by-side in peace with Israel, but 55 percent said they don’t believe it will ever happen and 27 percent said they believe the two-state outcome is inevitable but it’s going to take a very long time to achieve.

Researchers suggested that skepticism fuels violence, which makes a two-state solution very difficult to achieve. (See “New Research Shows Increased Arab Support for Two-State Solution.”)

Specifically, people who believe the two-state solution is either impossible or far in the future “end up in effect acting like they support militancy, and in fact supporting militancy,” Shibley Telhami, the Anwar Sadat professor at the University of Maryland, said at a Brookings briefing on the survey.

Is there an approach that will help translate the intellectual acceptance of a two-state solution into behavior that will support that solution? Or will the region remain trapped in an endless circle of skepticism?

“More than two centuries ago, bold and courageous visionaries pledged their lives, their fortunes, and their sacred honor in signing the Declaration of Independence. Guided by ancient and eternal truths, our forefathers proclaimed to the world that liberty was the natural right of all mankind …. It was the desire for freedom that inspired our Founding Fathers, and it is the belief in the universality of freedom that guides our Nation,” President Bush says in his 2008 Independence Day greeting.

The success of the United States’ great experiment has been and continues to be inspirational to many, but there’s an argument to be made that its success hinged as much on rich natural resources and relative isolation as on its “bold and courageous visionaries.” Setting aside the question of whether the U.S. version of democracy can be replicated elsewhere, what can or should the United States be doing to encourage democracy around the world?

Christopher Coyne, writing in the January February 2008 Cato Policy Report advocates “a principled position of nonintervention and free trade.” Drawing on those same forefathers cited by Bush, Coyne says, “If you go back to the Founding Fathers of America – George Washington, Thomas Jefferson, John Quincy Adams – all of them enunciated a position of economic ties with all and political ties with none.”

In the same article, Tamara Cofman Wittes suggests an alternative approach to nonintervention, “a menu of tools” that include “advice and training for political activists and political leaders; networking among human rights activists and political entrepreneurs; technical training for governments and government parties; financial and other forms of support for civic groups that are working to inculcate liberal values in their local environment.”

Separately, in her book Freedom’s Unsteady March, America’s Role in Building Arab Democracy, Wittes writes, “A proper understanding of America’s role and its limits is necessary to transform a comfortable and only-when-convenient idealism into a sustainable and effective policy.”

What are those limits? And what are the most effective tools for advancing liberty worldwide?

In response to the IIP eJournal Markets and Democracy, a reader self-identifed as “a Chinese citizen” submitted the following comment:

… What you termed as “marketization without democratization” is actually one phase in China’s democratization process, and it is a phenomenon of the process. The Chinese people have recognized that “marketization with democratization” is the hope for China and they will never allow “marketization without democratization” to persist for long. Social change takes time.

In order for China to realize “marketization with democratization” sooner, please do your best and in all possible ways to spread the idea of “marketization with democratization” and to help the Chinese people build a media where they can express their views. Meanwhile, please do not be deluded by the media of the power holders; because you are not living among the ordinary people at the grassroots level, and without understanding of the real situation, you are prone to being misled. (Telling lies is a common practice of the clique of the power holders in China). The key is, once becoming aware of the idea of “marketization with democratization,” the Chinese people will heroically fight for their own interests at any cost. Thousands of years of Chinese civilization attests to this.

The reader was responding to an observation by Kellee S. Tsai, professor of political science at Johns Hopkins University in Baltimore, Maryland, that China’s booming economy is bolstering its communist government. Tsai, citing ongoing censorship or repression of those who criticize the government, says that “the spread of market forces has bolstered authoritarian resilience and regime durability in China.”

Will China progress to “marketization with democratization” as our Chinese reader believes? Or will, as Professor Tsai says, China’s economic success prove “to be the party’s source of legitimacy rather than downfall?