One thing taken for granted but crucial for stable economic growth is equal access and recognition before the law. Economies are social systems reflecting behaviours bounded by informal and formalized rules.
Unfortunately most Economists, regulators and Finance types don't get this. Behaviour or social dynamics are a bit too non-linear to model effectively. This doesn't limit finance and economic types from applying mean-variance risk models to everything they see. These same confident people then turn to shock and surprise when things don't work out, but proceed on with the approach all the same.
A classic example of this is the well meaning but dangerous Myron Scholes (Nobel prize winning economist). He just blew up his second multi-billion dollar hedge fund. Please keep this man away from portfolios. I would posit that more economic value in the developed world has been destroyed by economists and risk managers using mean variance models than most natural disasters(see report) over the last 10 years.
Sustainable economic development & legal enfranchisement
If one wants to help a developing country, I would recommend studying a few that developed sustainably. One of the more fascinating examples is the United States as described by Hernando de Soto in the 18th & 19th centuries in his book Why Capitalism Triumphed in the West. The lessons about the value of legal access, a functioning bureaucracy, fairish treatment before the law and property rights is profound. These intangible things were paramount to building the United States and most developed countries. The soft infrastructure evolved over time from crude or non-existent concepts to become pillars of developed economies.
If it were up to me Hernando de Soto would receive a Nobel Prize in Economics.
Without the evolution of soft infrastructure in the form of equal access to land and property rights (minimal corruption required), many countries would not and cannot develop. My own hope is that more money is spent researching the soft infrastructure of legal enfranchisement and property. I am a cheap sustainable development type preferring soft infrastructure over hard infrastructure such as externally financed dams and roads etc. I don't believe in the Jeffrey Sachs & Bono ego gratifiction show that believes sprinkling the World with $150 billion will solve everything. This is a classic case of a consumptive culture laying its framework onto a problem. i.e. can't we just shop or buy our way to a solution.
Money applied intelligently is part of a solution but we still haven't gotten the intelligently part right. Buying things is easy, getting people to adopt ideas and codified behaviors is difficult.
For the price of one hydroelectric dam or project finance, a lot of legal and economic field research could be applied to understanding, selling and implementing property rights and creating huge amounts of value for the poor. de Soto estimates the payoff from these soft measures in the Trillions of $'s. For a critique of why the Bono & Sachs give away wastes precious emotional and fiscal development resources, read this excellent book from William Easterly.
The US is a useful example to learn from in terms of property rights and the economic power that comes from pursuing equality both in making and accessing the law. Yes, the current economic issues look daunting, but they are minor in the face of a wildly succesful 200 year development experiment which has provided so much for so many.
In that vein, a report put out by the UN, entitled Making the Law Work for Everyone makes interesting reading. The report deals to a degree with the distribution of legal rights in various countries. My guess is that the variance in legal enfranchisement correlates with economic and political stability.
Applying a metric of legal enfranchisement into debt risk ratings etc. or international aid policy initiatives could help foster both sustainable economic and human development.
One critique I have of the UN report is the use of the word empowerment. Social and political power is typically viewed in a zero sum context. Thus empowerment is not conducive to constructive dialog among parties. The explicit desire for power instead of participation thus becomes more militant in nature than solution oriented.
The good thing about using the concept of legal enfranchisement vs. legal empowerment as a conceptual catchphrase is that enfranchinsement provides a long term win for everyone in terms of stable economic growth and fully participatory political environments.