Stressing the application of progressive thought as a possible innovation toward development in developing countries, the paper discusses three major educational philosophies: romanticism, cultural transmission, and progressivisim (emphasizing the cognitive-developmental theory). Educational innovation and strategies for reform in the Soviet Union and the United States are discussed, along with differences between Soviet and Western education. Two stages in determining whether a country is ready for reform are addressed: Phase 1--Awareness and Transition--is characterized by a demand for knowledgeable manpower, supply of skilled manpower, design for increased equity, and resources for transition and Phase 2--Return to Learning--is characterized by a technological and legal change, information for innovation, and motivation for reform. The paper focuses on the political economy of education for development, examines the failure of the present system, and provides examples of victims of the failure and the effort being made to alleviate the situation, e.g., China's barefoot doctors and the problem-posing method used in Brazil's national literacy program. The paper concludes that failure of systems to respond to the needs of developing nations is accentuated by the fact that educational institutions in these nations have been borrowed from developed countries without any acquisition of an indigenous character as mentioned in a December 1974 working paper by the World Bank Education Department. (NQA)