Interesting email from reader in response to my USAT column (posted with permission):

Jonah –
As one of the few libertarians working in international development, I am pleased to see an argument for market-based development policy receive the publicity your column can bring. That said, the diagnosis and the prescription in the “Foreign Affairs” you highlight are not quite complete.
There is a lot of entrepreneurial activity in poor countries, probably as much as anywhere else. It does not appear that entrepreneurial behavior is culturally determined. The problem is that the rules and norms by which the local economy operates, what we call “economic institutions”, foster productive entrepreneurial activity such as opening a new business. Instead, we see corruption: soliciting bribes for performing routine regulatory or licensing functions, for example. Your job as a health inspector becomes your profitable business of putting an official seal on a real businessman’s documents.
The fact is that in many poor places the economy is very free. I often work in the eastern DRC, and the government’s role in business is minimal because there is almost no government. Sure, there are bribes to be paid, but there are almost no taxes because of the government’s inability to assess and collect them. The bribes are fees, and they are lower than taxes would be.
Yet that place and many others like it remain poor.
DeSoto said something else. Talking with him in Kazakstan a few years ago he talked about research he did on trust. “Generally speaking,” he asked in the survey, “do you trust your neighbors?” In the US, if memory serves, about 70% said yes. In his native Peru, yes got six or seven percent.
That is an economic institution, and until that changes, Peru will be poor.
So when NPR tells us about the mango farmer who needs a loan to dig a canal they get it wrong. She doesn’t need a loan. She doesn’t even need money. She needs water. So doesn’t she dig the canal? How many years has it been that she and her neighbors have not dug the damned canal?
She’s not an entrepreneur and she never will be. An entrepreneur would have moved years ago to find another opportunity.
And the well meaning development folks who want to help her with the canal? Well, if she gets the water then she gets a few more mango trees. That’s an improvement, but as long as the family business is a few mango trees, the kids won’t be in school for long.
I’ve got to get back to work. Thanks for reading and for your always excellent writing. For similar thoughts on micro-credit, go to www.jonthiele.com/essays2.html.