Assisting Developing Countries

Foreign Affairs writes:

The contrasting experiences of eastern Asia, China, and India suggest that the secret of poverty-reducing growth lies in creating business opportunities for domestic investors, including the poor, through institutional innovations that are tailored to local political and institutional realities. Ignoring these realities carries the risk that pro-poor policies, even when they are part of apparently sound and well-intentioned IMF and World Bank programs, will be captured by local elites...The deepest challenge for countries in the poorest parts of the world, especially Africa, is governance. The African continent has been ravaged both by civil war and conflict and by rapacious leaders who have plundered the natural wealth of their nations. Corrupt rulers and their weak regimes have arguably been the single most important drag on African development. But with increasing democratization, the situation may be starting to improve. And rich countries can play a large role in the reform process, for the simple reason that corruption has two sides -- demand and supply. For every leader who demands a bribe, there is usually a multinational company or a Western official offering to pay it. For every pile of illicit wealth, there is usually a European or American financial institution providing a safe haven for the spoils. The governments of wealthy countries need to take steps to block these activities.