Development: systems as distinct from aid

From Cafe Hayek comes a link to an interesting post on an even more interesting blog, called Aid Watch, with the tag line, "Just asking that aid benefit the poor". The post makes a distinction between "direct solutions to problems" and "problem-solving systems", and goes on to say why that's important:

Here’s why direct solutions to problems cannot foster development. Each direct solution depends on lots of other complementary factors, so the solutions can seldom be generalized across different settings; Solutions must fit each local context....

Development happens thanks to problem-solving systems. To vastly oversimplify for illustrative purposes, the market is a decentralized (private) problem solving system with rich feedback and accountability. Democracy, civil liberties, free speech, protection of rights of dissidents and activists is a decentralized (public) problem solving system with (imperfect) feedback and accountability. Individual liberty in general fosters systems that allow many different individuals to use their particular local knowledge and expertise to attempt many different independent trials at solutions. When you have a large number of independent trials, the probability of solutions goes way up.

Easterley, the author, provides a kind of qualification of his post near its end:

Direct solutions to problems (say, using aid programs) still may be worthwhile as benefiting a lot of people. But a long list of many such solutions is not development; development is the gradual emergence of a problem-solving system.

But that first sentence needs at least some elaboration or it undercuts his thesis -- e.g., direct solutions may be worthwhile only in the case where they don't depend of lots of other complementary factors.

Using aid, however, in an indirect manner, in order to foster problem-solving systems seems a much more promising strategy than we've generally been following to this point. Does that just get us back into a version of the "nation building" quagmire? Or could it mean that "nation building", when looked at in other than military terms, isn't so hopeless after all? Were/are the neocons right regarding long-term foreign policy objectives?