Take Russia or Bolivia as examples of what can go wrong. In each case, they quickly freed up their economy and tried to privatize everything. The problem was, they had no real legal system in place to properly check that activity. Key national industries went into the hands of just a few wealthy people (see Russia's Oligarch's). In Bolivia, after shock treatment, there was a rise in unemployment, a fall in industrial output, and a fall in per capita GDP.
At my university (50k students) I started the first micro-credit organization and we've made over 100 loans to entrepreneurs in developing nations -- so I am not against capitalism or anything like that.
But I've studied economic development enough to know that you have to take a multi-pronged approach to promoting development. It's not just about going full-free market or full donations/state involvement. It's requires a mix.