Few would object to the overall goal of ending extreme poverty. Few, then, wouldoppose this year's "Human Development Report" from the United Nations DevelopmentProgramme. But if the intentions are excellent, the obstacles to success are huge.The report's big plan is the Millennium Development Compact, which emphasises thatrich and poor nations both have obligations: the rich nations to open their markets andprovide more aid; the poor nations to improve their governance. Most problems wouldgo away if poor countries had efficient, accountable and honest governments. But goodgovernance cannot be created by external fiat. It is slow to evolve and fragile onceachieved. For this side of the compact, the citizens of poor nations can only hope thattheir governments live up to the fine words.Meanwhile, donors must encourage and support the highest standards. The best way todo so is to focus their aid selectively. Giving aid to good performers brings threebenefits: it weakens cynicism about the case for aid; it means aid is used moreeffectively; and it provides examples where good governments make real progress.Progress certainly has been made and there is always a poster child to advertise it(Mozambique is this season's star). However, the greatest progress has been achievedin two less photogenic titans, India and China.The Chinese success alone has outweighed failures elsewhere and, against the globaltrend, brought down the number of people worldwide living on less than a dollar a day. Ifthe case of China teaches us anything, however, it is that economies can be reformedwithout resorting to all the Washington orthodoxies. Development policy has to improvemany things simultaneously: low tariff barriers are well and good but little use to acountry without roads, banks and a healthy workforce.The "Human Development Report" does an admirable job of highlighting thesecomplexities. However, the choice of examples displays a worrying scepticism aboutmarket solutions. Successful instances of state provision of utilities are set alongsidestories of failed privatisation. Closer examination makes clear that market-baseddevelopment policy has had many successes, especially where state capabilities areweakest. Functioning market economies have been harder to create than many thought10 years ago. But we should not assume that the alternative to flawed capitalism isbenevolent, capable and well-funded government.With the best will in the world, governments of rich countries cannot solve all theproblems of the developing world. But they should at least try far harder. Aid budgetsneed both to increase and to be more effectively delivered. Developing countries alsoneed better access to agricultural markets in rich countries. Unfortunately, thedeveloped world has failed to lower farm protection over more than half a century. Thisis the time for a change. It is hard to believe it will happen.
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