The dilemma leaders of poor countries face; share the cake or bake a bigger one? Who can give them a hand?

The poorest countries of the world are more likely to be corrupt, disease ridden, warring, and have majority of their people living in poverty. Governments in poor countries would need to increase spending to boost their economies, but you cannot squeeze water from stone. Institutions are more likely to be weak, education more likely to be poor, and the impact of inequality more dramatic. This creates a poverty loop that leaves poor countries plodding behind while the rest of the world zooms ahead.

This leaves poor countries and their governments in a very difficult situation as they face the double-edged problem of stabilizing as well as rebuilding their economies at the same time. They become overly preoccupied with making short term fixes with little chance to move out of poverty. Elected governments get overwhelmed in this situation. Investment in long term solutions become more challenging and secondary.

Short term fixes won't help poor countries much. From an economic perspective, economic growth is ultimately driven by productivity growth. This includes making more efficient use of available human and natural resources as well as creating new ones. To be able to do this requires policies to be significantly oriented towards long term investments, investments whose real benefits are often not realized in the 5-year window governments have to have to convince their poor people to re-elect them. However, feeling better in the short term is not the same as being better, although the nature of poverty makes it difficult for poor people to raise their heads beyond their current situation. This creates immense pressures for government. Furthermore, a highly unpredictable international climate have poor countries sailing in even tougher winds.

What long terms investments increase productivity growth? To increase productivity requires investment on key areas. Improving education is one of the best. When a nations has a highly skilled and educated population, this sets a great foundation on which so much can be built. Education puts better skills, and ideas on the hands of the people. Improving infrastructure; better roads, improved electricity supply and access to better hospitals and transport systems all make the process of development faster. Furthermore, a healthy population is obviously a more productive one. Better health (esp. better nutrition and disease prevention) and access to adequate health facilities increase productive capacity and reduces time and financial loses due from ill health. Prioritising entrepreneurship and creating a better investment climate helps countries create new goods and services, and thus increase income that can create a positive loop that keeps feeding on itself.

The tangible returns on long term investments; education, infrastructure, health, and entrepreneurship are often not felt within a 5 year period. This contrasts strongly with a myopic focus in short term macroeconomic stabilization policy. Also, the huge capital necessary to make these investments are often out or reach of poor countries.

Poor countries (and their governments) need help to move out of this situation. In my view this comes from three major sources.

First, as difficult as it is, populations in poor countries must understand that the changes that are going to take them out of poverty are not going to be short term fixes, they need to encourage their governments and give them the chance to also focus on real fixes. Poor populations need to make this sacrifice if they want improved standards of living.

Second, structures of international development and cooperation like the UN, World Bank, International Monetary Fund (IMF), World Trade Organization (WTO), and other continental and sub-continental platforms need to appreciate the difficult situation poor countries find themselves and thus direct technical and financial resources towards relieving these stressed economies.

And finally, because poor countries lack the necessary resources and institutional capacity governments of developed nations need to provide proactive technical and financial support to fund these long term endeavours. They can also help build structures that improve private sector investment in poorer countries. Investors are often not confident to invest in poor countries for fear of losing their money. Without this capital however, poor countries remain in poverty. Developed countries can work with poorer countries to develop structures that make investing in poor countries safer.

In the end, we have to realise that poor countries are trapped in a situation that is difficult for them to transcend alone. Though difficult, poor countries need to recalibrate the criteria for measuring their governments' effectiveness, toward the extent to which they make long term investments. Perhaps poor countries also just need enlightened leaders aggressively fighting poverty, less preoccupied on exploiting conditions created by poverty. The international community and developed countries also need to understand that eradicating poverty means a happier and safer world for everyone.