This state-of-the-art survey argues that democratic governance is the most important, if illusive, ingredient for economic advancement in the developing world. It draws heavily on the insights of Amartya Sen, the Nobel Prize-winning economist who has shown how elections and a free press give leaders in poor countries incentives to avert famines. The reduction of poverty, the report states, requires equitable growth and genuine political participation across society, both of which are fostered by building and deepening democratic governance. Indeed, the move toward democracy can trigger a "virtuous cycle of development," as newly empowered people push for policies that expand opportunities and check government corruption and distorted budget priorities. The report cites Indonesia, Mexico, and Poland as examples where democratization has produced such cycles of civil activism, political reform, and economic advancement. But it also acknowledges that progress in poor countries has been uneven at best over the past decade. Although the share of people living in extreme poverty has declined, differences in life opportunities between rich and poor countries have actually increased. And the spread of democratization has stalled as many countries fail to consolidate their initial moves toward more open government. Unfortunately, the report offers few ideas on how the outside world can help poor countries make the democratic transition.