The international development industry is vast. When official development assistance (aid offered by wealthy countries for the “economic development and welfare of developing countries”) and other forms of aid including disaster and relief are taken into account, the industry spends upwards of $200 billion annually. And that number continues to grow every year. In fact, since 1960, members of OECD countries (some of the world’s richest countries) have spent more than $4 trillion trying to help low- and middle-income countries escape poverty.
The verdict on the efficacy of the resources we invest in the problem of eradicating poverty, however, is less clear. Although we’ve certainly made some progress over the last thirty years, a majority of the people who have escaped poverty are from China. And unfortunately, in some regions, like Sub Saharan Africa, the number of people living in extreme poverty has actually increased. Why is the flood of resources not yielding as much progress as we’d like?
Our research suggests that a paradox is at play. It may sound counterintuitive, but prosperity isn’t generated through the flood of resources designed to remedy things like low quality education, subpar healthcare, bad governance, nonexistent infrastructure, and so on. Instead, for many countries prosperity takes root when investments are targeted at a particular type of innovation: market-creating innovation. This type of innovation serves as a catalyst and foundation for lasting economic development, and results in not only the creation of new jobs, but also the development of the processes and infrastructure necessary to sustain that development.
To learn more about the Prosperity Paradox (and how communities around the world can develop innovations to help them begin their march toward prosperity), vote for my panel to be featured at SXSW with my co-authors Clayton Christensen and Karen Dillon. We will share some of the key insights from our our upcoming book, The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty.