First, America must remove trade barriers on exports from the poorest countries, regardless of trade policies in those countries. With global market access, poor countries would automatically attract private investment, despite their institutional weaknesses. These institutions would become stronger over time as businesses flourish. Private investments capitalizing on access to global markets would necessarily employ low-cost labor, thus creating jobs.
This is according to Iqbal Quadir, co-founder of Grameenphone, writing last month in the Wall Street Journal.* Quadir argues for an overhaul in rich-country foreign aid policies, with entrepreneurship taking center stage. While I agree that a reduction in trade barriers would be helpful, something about the word "automatically" strikes the wrong chord. Can it really be so simple to attract private investment, despite the challenges of good governance, infrastructure, or human capital?
[*Correction: I incorrectly spelled Iqbal Quadir's name in the original post. Thanks for the correction go to Asif Dowla, who also pointed out that Quadir was not the sole founder of Grameenphone.]