The "developing-country trap" is a short-hand I use to describe the malaise of developing countries which is:
1. Most countries that are "developing" are mostly in the tropics, and are generally blessed with the endowment of natural resources. This is where primitive communities are preserved through time - because life is generally comfortable, as nature provides everything for humble human survival.
2. "Development" usually involves the extraction and exporting of the natural resources in the raw form by monopolies or private individuals in collusion with the government or government officials. The elite seeks to preserve its monopoly on the economy and the politics. The profits are invested in assets abroad and are not used to add value to the economic process.
3. When exploitation of the natural resources is done, the economy goes into "structural recession." The next phase is to go into industrialisation. Since local capital is not developed, any attempt by the government to go into business is met with failures. The economy is opened up to foreigners, with deals with the elite.
4. The workforce is trained to feed the industries at "competitive" wages. The local population has no savings. Whatever savings they have go into housing and transportation and food, and privatised pension if any.
In other words, the assets of the nation - the national resources - that are exploited are not used to reinvest into the economy, namely, people and knowledge and investments, but are squirreled abroad - which usually results in a weak currency - which is used as an argument by the central bank that this is good for exports (but with the public having to pay exorbitant prices for imports). This is a trap.
To get out of the trap, I am suggesting that investments should be made by the government on the people and the educational system because our human resources are our next precious resources. Once our human capital has grown, it will come up with ideas and decide for itself the nature of investments - how best to go forward for themselves and hence the society and the economy.
Liberty creates economic opportunities for everyone.