The European Commission’s Directorate-General for International Partnerships (DG INTPA) recently set me thinking, with a quite categorical statement that traditional development cooperation has failed. They used the low graduation rate from Least Developed Country (LDC) status as evidence. The proposed solution is a pivot to infrastructure investment. But does this align with what we know about successful development?
The Infrastructure Push
DG INTPA’s position reflects a growing trend in development thinking: concrete, visible investments in infrastructure might succeed where decades of traditional development cooperation have apparently failed. It’s an appealing argument—after all, who can deny the transformative potential of roads, ports, and power plants?
Yet, infrastructure alone is no silver bullet. Infrastructure investment without considering the context often leads to wasted resources and even exacerbated inequalities. Why? This year’s Nobel prize tells us that answer lies in institutions.
Enter the Nobel Laureates
The 2024 Nobel Prize in Economics went to Daron Acemoglu, Simon Johnson, and James Robinson for their groundbreaking work on institutions and development. Their research underscores a critical point: infrastructure investments can yield radically different outcomes depending on the institutional context in which they are made.
For example:
- A port facility may become a hub for economic growth—or a source of corruption.
- A road network might connect communities—or facilitate resource extraction that benefits only a few.
- Power infrastructure could transform a country’s energy system—or enrich connected elites.
It turns out that the key difference is institutions. Inclusive political and economic institutions, which distribute power and opportunity broadly, create environments where infrastructure delivers shared benefits. In contrast, extractive institutions concentrate power in the hands of elites, often undermining development.
The Implications for Development Cooperation
The Nobel laureates’ research challenges the narrative that infrastructure investment alone can drive development success. Instead, they suggest:
- Institutions First: Strengthening governance and accountability mechanisms must precede or accompany infrastructure investment.
- Context Matters: Policymakers need to ensure that infrastructure projects align with local institutional capacities and development priorities.
- Long-Term View: Institutional reform and capacity building take time but are essential for sustained growth.
As DG INTPA pivots towards infrastructure, these lessons are worth bearing in mind. Infrastructure investments are necessary—but without strong, inclusive institutions, they risk reinforcing inequalities rather than reducing them.
A Broader Perspective
While the Nobel laureates focused on institutions, there’s another piece to the puzzle of development success: civil society. In our next post, we’ll explore how civil society plays a critical role in strengthening institutions and driving inclusive development.
References
- Acemoglu, D., & Robinson, J. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty.
