Abstract
The aid model for development is broken. It has failed to deliver meaningful progress in developing countries across a wide range of development indicators. Moreover, the model is now constrained by the fiscal realities of the major donors. Its failure is a function of ignoring the institutions, formal and informal, and incentives that often work at cross purposes to donors when the state is not functioning properly. A model that recognizes and builds on the existing, often local, institutional relationships in poor countries through public private partnerships (PPPs) offers renewed possibilities for success. PPPs can create trust through enforcing existing and newly created local institutions from the bottom up and lower investment risks by using donor money as a lever to mobilize private loans and investments. These mechanisms will support economic exchange, the source of development. This paper discusses the origins of this model, the different forms it can take, and the challenges it faces.
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