Development Assistance, 27th Dec., 2010.

William Easterly has an article in the American Economic Review, titled "Was Development Assistance a Mistake?"

In the 1950s through the 1970s, development (i.e., economic growth) was a simple matter of raising the rate of investment to Gross Domestic Product (GDP), including public investments for roads, dams, irrigation canals, schools, and electricity, as well as private investment. Private investment, however, was usually not trusted to do enough or to do the right things, and so there was a strong role for the state to facilitate and direct investment, guided by the development experts.

Unfortunately, the debts accumulated to finance these investments turned out not to be repayable. So, there were two debt crises during the 1980s. Middle-income countries had borrowed from commercial banks at market rates, while low-income countries had loans from official agencies at concessional rates. Both entered into a long process of rescheduling and writing off debt that led to a lost decade for both groups of debtors. Understandably, inferring that unrepayable loans were a sign of unproductive investments, especially in Latin America and Africa, development wisdom shifted away from mobilizing and guiding capital accumulation. Attention, instead, shifted toward the success of the East Asian tigers (South Korea, Taiwan, Hong Kong, and Singapore), which combined export orientation and macroeconomic stability. This became the inspiration for structural adjustment packages of the IMF, the World Bank, and the "Washington Consensus," which called for removing price distortions, opening up to trade, and correcting macroeconomic imbalances (mainly budget deficits). [ . . . ]

The twentieth century's first development economist may have been Vladimir Lenin, who wrote a famous pamphlet in 1902 called "What Is to Be Done?" He said that the revolutionary intelligentsia had the answer. A long line of such diverse thinkers going back to the French Revolution such as Edmund Burke, Karl Popper, Friedrich Hayek, Isaiah Berlin, and James C. Scott have criticized the idea that experts can redesign society, and the catastrophic outcomes of the more extreme attempts to do so supported these criticisms. Yet the unquenchable demand for experts who can all tell "us" the right answers shows no sign of ending soon.