Politicians have tried various forms of economic and political systems to encourage growth, but there has been little conclusive evidence to support any single solution.  Such efforts are important, but often fail to consider an important topic: incentives for developers.

Many people call for an increase in attention and funding for international development. This is a good thing.  However, these pleas and demands fail to establish a powerful incentive for those who could fund massive development projects. 

The promise of future profits from the developing world fails as an incentive simply because developed countries already make an incredible amount of money from poor nations.  For example, sub-Saharan Africa sends $25,000 every minute to northern creditors; and the majority of what little capital is held by Africans is kept in northern banks.  In Vietnam, Nike employs around 35,000 workers who, in total, earn a combined salary less than what Michael Jordan earned in a year.  Such cases are plentiful.  Developing nations are dependent on first world technology, money, and even food.  The First World is dependent on cheap labor and desperate debtors.  Why would a corporation take a risk by investing in future Third-World growth and altering the status quo when there is already easy money at hand?

Understanding how large banks work can explain a trend in development that initially appears to be a counterexample: debt forgiveness.  Though it seems like an incredible idea (the unshackling of indebted nations by providing a clean slate of credit), the incentives problem is often overlooked.  In order to convince governments and banks to forgive debts, there must always be a return for the lender—usually a massive western-style economic reform.  Such reforms are argued to provide an increase in GDP and are good for all involved.  However, these reforms (which center around privatization of public goods and market liberalization) benefit the rich almost exclusively and can significantly damage a developing economy.

A great example of the potentially devastating effects of such reform can be seen in Haiti.  Twelve years ago, under René Préval, economic reform was taken that privatized the state flourmill and the state cement company.  The flourmill was bought by an American company and then immediately shut down.  Haiti has been dependent on foreign flour since.  Furthermore, Haiti is a country sitting on limestone (the foundation of cement), but when the state cement company was privatized, it was also shut down and turned into a receiving bay for imported cement.  Foreign, and particularly American, interests have benefitted greatly by making sure that Haiti was dependent on foreign goods.  True development would have focused on strengthening Haitian industry and production capacity, but foreign corporate interests do not gain as much from such a strategy.

So what would cause corporations and governments to really engage in development?  One proposed idea is to move development into the hands of non-profit organizations.  Unfortunately, most NGOs with the resources to manage large-impact projects require government and corporate funding and, as such, are influenced by the same self-interested incentive system. The World Bank does not operate for profit but is incredibly good at getting nations into debt traps while simultaneously securing pro-Western economic reform.  The World Bank, and organizations like it, should stay out of managing economies, instead fighting corruption and providing the funds for domestically created development plans.  Local politicians know their nations best, and when they are well educated and honest, they will be the most capable economic leaders.  Some economies will not become as open as the West may want, but by enabling good governance and effectively using incentives, we can achieve enduring development.

Spencer is a junior studying political science.