What Can the Rich Countries Do?
How can rich countries help? The key is to provide the right incentives. Currently the IMF and the World Bank often find it hard to deny loans to governments in the less-developed world that misallocate the funds or refuse to develop the institutions that are needed to make a nation’s economy successful. The inability to “just say no” creates the wrong incentives for ill-run nations. Money should be used as a carrot to encourage poorer countries to develop good institutions. If a government in one of these countries is unwilling to do this, the IMF and the World Bank must use the stick and cut off the flow of money. This approach sounds harsh, but it is better to engage in tough love than to allow countries to continue down the wrong path. International financial institutions such as the IMF and World Bank and other governmental organizations in the rich countries (like the Group of Seven or G7) have also had a tendency to impose on less-developed countries institutions patterned too d
