The death of two young men involved in a high speed police pursuit which sparked four nights of “rioting” in Macquarie Fields in Sydney’s south-west, raises questions about the adequacy of current policies and programs designed to deal with the complex, multi-faceted problems generated in areas of social disadvantage. Critics of social welfare policies in Australia and in other OECD countries argue that more attention needs to be paid to rising levels of inequality and to the structural causes of poverty and social exclusion: that there needs to be greater recognition of the capabilities of the poor and, in particular, poor people’s own sense of problems and solutions, as well as a commitment to empowerment outcomes. This paper argues that development thinking on poverty (as exemplified in the 2000/2001 World Development Report) has the potential to overcome the problems identified in current Australian and EU approaches to poverty and social exclusion.