(FORTUNE Magazine) – Development economists used to be big fans of command-and-control management of the economy in poor countries. That kind of thinking has landed on the dustheap of history, replaced by the conviction that free markets are what create progress. Personifying the new thinking is Lawrence Summers, the 37- year-old superstar of Harvard's economics department, who has been serving for the past year as chief economist of the World Bank. Summers spoke with FORTUNE's Rob Norton.

I'm struck by the degree of consensus -- among leaders in many developing nations as well as industrial ones -- on the basic message: National development failures are the result of national policies, not a hostile international environment or some kind of physical limit to growth. We've learned that there are all kinds of things governments can't do at all or that they do terribly -- like running steel mills. But there is also an understanding that governments absolutely need to do certain things: educate kids, provide basic agricultural extension, and provide competent regulation of the financial system. The idea that there should be a separate economics for developing countries was badly misguided. Every important prediction that was made on the basis of culture has turned out wrong, starting with the mission to Japan in 1915 that said the Japanese ethic was unsuited to capitalism. All people respond to incentives, and in ways that are surprisingly similar. In fact, the fraction who say pay should be based on productivity rather than an entitlement is higher in Russia today than it is in the U.S. Many African nations are starting from a very low base, but if they pursue the right economic policies and if the world continues to maintain support -- which I think it will, if the right policies are pursued -- there is room to be optimistic that progress will come. Of course, it's not something that will happen overnight. The World Bank has been right to make lending conditional on whether money is going to be used well or poorly. Industrial countries must continue to provide substantial resource flows, but the single most important thing they can do is to keep their markets open. Every economic miracle in development has been driven by export success. It could be a great disaster if the developed world tries to shut its doors.