The right investment climate is not just about attracting multinationals and foreign direct investment, although this is a valuable by-product. It means creating conditions for ordinary people to enjoy the benefits of their own efforts. Keeping inflation low and opening up to trade help make this possible. Rooting out the fees, bribes and extortion of petty thugs and predatory local officials allows small-scale entrepreneurs to flourish. An attack on poverty is vastly more successful if it empowers poor people to take part in the economy and shape their own lives, through education, health care and participation in the decisions that affect them and their families.
Education is a prime example.
In El Salvador, communities elect parents who are responsible for hiring and firing teachers and equipping and maintaining schools. Teacher and student absences have dropped sharply. A similar program is improving education for 50 million children in India, where new census figures show a steep drop in illiteracy. As more nations adopt the conditions for broad-based growth, countries that provide aid have noted the changes and are supporting modest increases in foreign assistance and reductions in trade barriers. After falling for nearly decade, official development aid has begun to recover.