How poor countries can become rich ones is the most important questions in economics — but also the hardest to answer. Each country can only get rich once, and countries differ a lot, so drawing generalizations from repeated experience is difficult. And the process of development is so complex that economic modelers barely know where to begin. Plenty of economists have proposed general theories of how economies grow, but they’re all very challenging to test empirically.
But despite the lack of a general theory of growth, economists who work for agencies like the World Bank and the International Monetary Fund have to give some kind of advice to developing nations. Often, they default to the comfortable old chestnuts handed down from Adam Smith and David Ricardo — open your markets to trade, privatize state-owned industries and don’t run big fiscal deficits. Get the government out of the way, and growth will follow.
