The persistence of world poverty in the face of increasing global interdependence of economies presents a challenge for ethical deliberation. Taking into account the role of institutions in fundamentally influencing economic performance and income distribution in developing countries, market forces are found to be inadequate for resolving the problem of world poverty. In response to the ethical challenge of acceptability of the world's market-based economic order, three main theories of justice are reviewed but found wanting as alternative solutions. Finally, an ethic of development is proposed that meets the criticisms raised both against the market and against the theories of justice discussed. Its principal elements are inter-subjective dialogue, the respect for cultural diversity and a theory-practice approach to development. © 1997 John Wiley & Sons, Ltd.