Capitalism & Development

WILLIAM EASTERLY:

"Development economics still bears the scars of the Depression. A prominent World Bank Growth Commission concluded in May that 'fast, sustained growth does not happen spontaneously. It requires a long-term commitment by a country's political leaders,' and 'each country has specific characteristics and historical experiences that must be reflected' in the leaders' 'growth strategy.' Some at the U.N. still recommend the discredited Big Push strategy of state-planned investment.

How much poverty has endured because individual entrepreneurs were shunned in favor of the likes of the $5 billion state-owned Ajaokuta Steel Mill in Nigeria, which never produced a bar of steel? Or because African governments spend their time preparing World Bank-required national Poverty Reduction Strategy Reports instead of freeing space for innovators?

We will never know. But we do know that the free market has a long-run track record of creating prosperity -- even with the occasional crash. The Depression's deceptive intellectual legacy is that development flows from all-knowing states rather than creative individuals. Here's hoping that the backlash to today's crash will not spawn another round of bad economics for the poor."