I think both these explanations are missing that there are many factors behind successful economic development, and increasing one factor of production will help if it is the limiting factor, but hurt if it is already abundant.
If you give money to people who already have technical know-how, a willing market, a solid distribution network, and a stable legal system but just lack access to capital, it will usually have very good returns. If you give it to people who have none of these, it will get spent on whatever good happens to be available, usually booze. If you replace the government of a country that has capital, an educated populace, and solid infrastructure but suffers from endemic corruption and lack of solid legal foundations, you will probably also help spur economic development.
What I wish more poverty-alleviation problems did was focus on identifying and eliminating bottlenecks to economic growth. The casual American readership loves to think there's one solution and then loves to argue over what it is, but I don't think it works that way. Poverty is complex; the reason that inner-city Baltimore is poor is very different from the reason Kenya is poor, which is different from why rural China is poor.
If you give money to people who already have technical know-how, a willing market, a solid distribution network, and a stable legal system but just lack access to capital, it will usually have very good returns. If you give it to people who have none of these, it will get spent on whatever good happens to be available, usually booze. If you replace the government of a country that has capital, an educated populace, and solid infrastructure but suffers from endemic corruption and lack of solid legal foundations, you will probably also help spur economic development.
What I wish more poverty-alleviation problems did was focus on identifying and eliminating bottlenecks to economic growth. The casual American readership loves to think there's one solution and then loves to argue over what it is, but I don't think it works that way. Poverty is complex; the reason that inner-city Baltimore is poor is very different from the reason Kenya is poor, which is different from why rural China is poor.