The most striking differences between the undeveloped world (i.e the Third World), or the developing world on one hand, and the developed world, on the other hand, are matters which, in the United States, are the responsibility of local governments and public utilities.
For example, take clean drinking water. Almost every country in the undeveloped and developing world, from Mali to Mexico, does a poor job of supplying its people with clean running drinking water. This is something that state and federal governments in the United States play only a miniscule role in, and that role is almost entirely regulatory -- setting standards for water quality and monitoring compliance with those standards. Water supply systems and water treatment plants are almost universally constructed and operated by local governments, or small, highly regulated utilities.
There are other examples. Most countries outside the developed world have inadequate sewage systems. African cities are famous for having streets with no meaningful traffic law enforcement. Electricity service is unreliable in places from Baghdad to much of Latin America. Emergency medical and fire services are often poor or absent. Elementary and secondary education is often abysmal and widely underenrolled. Pot holes in roads quickly become ponds. Political parties like Hamas have made themselves dominant political players in part by providing such basics as neighborhood libraries and soccer leagues.
Look at Iraq. The complaints about a lack of reliable electrical service, about non-political street crime, about patchy garbage collection, and about water systems that two and a half years after the U.S. invasion are still not up and running rival concerns about suicide bombers.
By comparison, most countries in the developing and undeveloped world do a fairly credible job of providing many services associated with national governments. In most of the Third World, postal service is more reliable than electrical service. Almost every country has a somewhat functional military. West Africa and Central Africa, for all of their other problems, have managed to find a way to provide their citizens with a stable and functional currency (the CFA Franc). In many countries the higher educational institutions are one of the few little islands within the country where things generally seem to work. Tax collections are usually poor and the social safety net is usually weak, but part of this is a consequence of widespread poverty that has a lot to do with an underlying chaos at the local level that flows from a lack of well organized local governments.
Compared to many other functions of government, the services provided by local governments are not terribly expensive. The average American spends far more money on federal and state government functions like Social Security, Medicare, Medicaid, national defense, interest on the federal debt, unemployment insurance, interstate highway maintenance, higher education, state prisons, and the like, than on the basics of local government.
While these functions can be provided locally, however, no amount of entrepreneurship can make them happen without governmental sponsorship and regulation. Almost no place in the entire developed world has a for profit, unregulated system for providing tap water, electricity, local streets, traffic patrols, elementary and secondary education, or sewage services. Notwithstanding myths about the powers of the market in a laissez faire economic system, every successful market economy rests on the foundation of a governmentally provided basic infrastructure. It was true way back in the days of the Roman Empire, and it remains true today.
Historically, foreign aid has been directed primarily at national governments and big projects. But, recognition of the fact that much of what is absent from these political economies is missing at the local government level does provide a window of hope. It is possible to put in place working local governments one city or village at a time, at a reasonable cost. And, a smattering of functional local governments can serve as models for whole countries and regions. Sure, you can encourage foreign direct investment with tax breaks and loan guarantees, but simply having cities where the water from the tap is safe to drink, the toilets work, the power doesn't go out several days a month, the garbage is collected on time, people pay attention to traffic signs, local libraries are well stocked with books, and the elementary schools are fully enrolled and have adequately trained teachers, would promote growth far better. Singapore and Hong Kong owe as much of their development success to having functional local government administrations as they do to laissez faire economic policies.
When you live in a developed country it is easy to get fixated on the relatively lower priority "advanced" economic issues that dominate your own country's political scenes, while ignoring the basics that have become non-partisan, uncontroversial and mostly ignored foundations for the rest of private and public sector activities. There is nothing exciting about a mosquito control district, unless you live in a place that doesn't have one and needs one. Problems like cholera and mosquito borne fevers, which were dire problems in places like New Orleans in the early 1800s until public health and sanitation measures swept the nation, are problems we have forgotten how to solve because we no longer have them. But, when hurricanes rumble in and disrupt those local government services for a few weeks or months, often requiring the entire local infrastructure to be rebuilt from scratch, we are reminded of how little stands between the modern and comfortable lifestyle we enjoy in the developed world, and the privation and suffering that much of the rest of the world endures. If we can rebuild from scratch in Mississippi and Louisiana in a matter of months, why shouldn't we able to do the same thing in the developing and undeveloped world in selected cities in just a few years?