Poverty, poor health, low life expectancy, and an unequal distribution of income and wealth are endemic throughout the world. Many countries have very low or negative growth rates. Even some countries that are well endowed with natural resources have poor growth records and low per capita incomes. Others, especially in the former Soviet bloc, have weak economic records in spite of a well-educated labor force.

Yet a paradox exists. International lending organizations, such as the World Bank, often have difficulty locating acceptable projects. How can this be so when the need is obviously so great? One root of the problem is dysfunctional public and private institutions. Poorly functioning governments mean that outside assistance will not be used effectively. Low-income countries and those with weak growth records are often in difficulty because they are unable to use their human and material resources effectively. They need institutional reform, but such reform is difficult. Constructing dams, highways, and port facilities is technically straightforward. Reforming government and nurturing a strong private sector are more subtle and difficult tasks that cannot be reduced to an engineering blueprint.

The tension between the capacities of developing countries and the requirements of international aid and lending organizations arises from sources as multitudinous as the histories and cultures of the countries involved. To critics, the international organizations do not appreciate local customs and institutions and fail to adapt their programs to fit individual country's special circumstances.