Review of ‘The Bottom Billion’ by Paul Collier

Bottom_Billion_book_cover

The central tenet of Paul Collier’s ‘The Bottom Billion’[i] is that the world’s poorest people are stuck in economies that have been stagnant or regressing for over forty years. More alarming still, there is little evidence of an imminent turn-around; the forces of globalisation and capitalism have therefore not benefitted a sixth of the world’s population. Most importantly, Collier proposes some credible (and occasionally controversial) solutions to the stubborn challenge of kick-starting growth, notably shunning anti-interventionists and imploring international powers to act.

Collier’s book, released in 2007, joins into a discussion already alimented by figures such as William Easterly and Jeffrey Sachs, aiming to explain why poverty endures and some countries fail to develop. The debates at the time ranged from exploring lack of growth-inducing incentives, which resulted from misguided aid programmes[ii], to the failure to use local knowledge to devise local solutions[iii]. Sachs contended that factors such as undesirable geography, poor infrastructure and bad healthcare explain persistent poverty, but notoriously suggested that $75 billion in aid annually – properly directed – could rescue the world’s poorest economies.[iv] The problems of these countries must be better understood therefore, and the quest for solutions must be far more radical, because estimates upon the publication of Collier’s book indicated that these countries were only diverging even further from the rest of the world. Collier thus contributes to the contemporary discussion by proposing four poverty traps, and explaining that aid must be reworked and supplemented by radical international measures.

Collier identifies four poverty traps that impede development, which will be presented in turn, and critiqued where necessary. Backed up by academic research, he explains the relationship between poverty and the first trap: conflict. The correlations are most compelling: 73% of the countries he analyses have recently gone through a civil war.[v] Furthermore, a country with half the revenue of another has double the chance of descending into civil war.[vi] While causality can of course go both ways, the interaction between the two is best explained by the corollary figures: a low income country presenting a 14% risk of civil war (over five years) can reduce this risk to 11% if GDP grows at a rate of 3%.[vii] Conversely, the risk will rise to 16% if GDP falls by 3% in the same period.[viii] Some less intuitive albeit important findings make it clear that conflict must be understood above all as a poverty issue. To be sure, Collier identifies no proven link between a heightened risk of civil war and: 1) political or ethnic repression; or 2) income inequality.[ix] While controversial, this is supported by the fact that countries like Nigeria, Rwanda, and Côte d’Ivoire all lived through relative periods of harmony before economic factors fomented existing tensions and led to violence.[x] The case for growth as a bulwark against conflict is convincing therefore, especially given the deleterious economic consequences of war and the dual element of this trap: the heightened risk of relapse for recent conflict countries.[xi]

The next trap relates to natural resources and the associated curse on a nation’s growth, which can be explained by the overwhelming tendency for bottom billion countries from Angola to Zimbabwe to mismanage natural resource wealth through rampant corruption, stashing revenues in foreign bank accounts or by diverting capital, skills and investment into this particular sector, thereby neglecting the rest. Yet one of the most striking facts about resource-rich countries in the bottom billion is not that they haven’t experienced impressive growth, but that democracy appears to be a common impediment to growth in all such countries.[xii] On average, oil-rich autocracies grow 3% more than their democratic counterparts.[xiii] And yet, the inverse is true for resource-poor countries; democracy affords them a 2% higher growth rate than that of autocracies.[xiv] Collier’s analysis here builds on that of Sachs; electoral competition is quickly translated into a heightened form of patronage in countries that experience a windfall in natural resources.[xv] At this point, something of a contradiction in Collier’s work should be noted, however. Firstly, his statement that the “central problem of the bottom billion is that they have not grown”[xvi] is untrue when we consider the plethora of countries that have seen GDP skyrocket on the back of natural resource discoveries. Indeed, by focussing the rhetoric on growth, Collier risks ignoring the axiomatic truth that GDP, by measuring economic activity, can (and often does) rise even though the incomes of the vast majority of citizens do not. India, for example, which experienced remarkably high growth rates between the 1970s and 1990s nonetheless saw an increase in rural poverty from 56% (1973-1974) to 75% (1999-2000).[xvii] India today falls behind Bolivia (one of Collier’s bottom billion) on the Human Development Index[xviii] and yet is cited as a “successful developing country” in Collier’s work.[xix] This example is thus a powerful reminder of the need to remain critical about inequality resulting from certain forms of growth.

 

Arguably the most inexorable of the traps is that of being landlocked, because being spared from the damaging effects depends on what neighbouring countries do. Indeed, a country unthreatened by conflict, which handles its resources responsibly and improves governance may nonetheless find itself in the bottom billion because of ‘bad neighbours’. All things considered, a coastal country stands to grow 0.4% if its neighbours grow at 1%.[xx] For landlocked countries, the trickle-down effect is more marked: 0.7%.[xxi] And yet, African landlocked countries see just 0.2% growth.[xxii] Here, Collier underpins previous work, explaining such figures with a litany of factors that impede growth in landlocked countries; among them are customs duties, unfriendly business environment, and the huge phenomenon of brain drain.

One aspect perhaps insufficiently addressed by Collier is the role remittances play in the economies of the bottom billion. Collier makes some general statements about how rich Central Africans or talented Chadians, for example, will choose to dispose of their capital: they will invest it abroad, or emigrate.[xxiii] Such statements risk being oversimplifications, however, in the absence of Collier’s habitual statistical analysis. Indeed, remittances and reverse brain drain are direct consequences of globalisation[xxiv] and merit a more in-depth cost-benefit analysis. To be sure, Collier applauds efforts made by countries like the Philippines to actively train its citizens for employment in higher income countries.[xxv] The reader – or indeed policy advisor – can be forgiven therefore for confusion felt over the benefits and drawbacks of brain drain and remittances.

Collier’s final trap concerns that of ‘bad governance’, and it is easy to see how this could hamper a country’s development. 76% of the inhabitants of the worst-off countries have lived through prolonged bad governance, according to Collier.[xxvi] One must observe here, however, that Collier uses the World Bank’s assessment of ‘good’ or ‘bad’ governance’, relying on 25 criteria, and for which there is a proven correlation between ‘good governance’ and higher GDP per capita. However, Meisel and Ould Aoudia have since pointed out that there is in fact no proven correlation between this type of ‘good governance’ and the speed of growth.[xxvii] What this shows is that the World Bank’s criteria for good governance are not, in fact, priorities for growth. They are of course important, but only when growing countries seek to converge with middle-income countries. For escaping the trap, however, the key is governance for development, not good governance in itself. Free trade and global capitalism are eminently not going to kick start growth for the bottom billion. Indeed, Africa – under increasing influence from China – has been centering its growth on exports of natural resources, yet it is long understood that significant development comes from manufacturing exports, which are much more profitable. Moreover, countries that focus solely on natural resources for growth tend to become more corrupt and uncompetitive in other industries: the aforementioned Dutch disease. The globalisation of financial markets is not particularly helpful to the world’s poorest countries either, because the markets are deemed too risky – and the countries’ institutions too corrupt – for investment. The cost of all this to a failing state and to its neighbours, on Collier’s estimate, amounts to an average of about $100 billion per analogous state.[xxviii] This is of course a provocative figure, but not one that should be taken too seriously when devising policy solutions for individual nations. Indeed, such a figure is dwarfed by ongoing spending on countries like Iraq and Afghanistan, whereas countries like Djibouti have obtained nowhere near such a level.[xxix]

Potential solutions

Viewing aid neither as an unconditional remedy nor a mere panacea to poverty, Collier shows that, on average, aid for development contributes one point annually to growth rates in the least developed countries.[xxx] Yet he also points out that in dysfunctional states it tends to be siphoned off to corrupt politicians, used to bolster military expenditure and only further subverts the rule of law.[xxxi] Something of a middle ground is thus required, but one of Collier’s principle suggestions – that of aid in the form of technical assistance – is not uncontroversial. On the one hand, Collier is right to point out that the poorest countries lack human resources in many fields, and must import people to train them. Moreover, this type of expenditure does not generally fall victim to corruption or Dutch disease. Yet, much evidence has emerged in the past decades that technical assistance is not only scandalously expensive[xxxii], but is ineffective in the long run because it lacks expertise and disincentivises local ownership.[xxxiii] Whether or not technical assistance is a credible form of expenditure, or if there are other more effective methods of capacity building, it is clear that more rigorous evidence is needed. Incorporating one of Sachs’ proposals, a stronger case can be made here for aid spending to build the infrastructure that makes exporting possible.[xxxiv] In addition, with a higher import content for aid spent on infrastructure, there is less room for Dutch disease.[xxxv]

Realising that problems of the magnitude described in the book require fundamental institutional change, Collier proposes a set of international charters enumerating basic standards for developing nations to follow; in budget and natural resources transparency, democratization, investment and management of post-conflict situations.[xxxvi] This would certainly be a welcome step in the right direction, but this is neither the most radical nor the most promising suggestion, particularly because they are unlikely to make much difference to the first of Collier’s traps: conflict. Rather Collier identifies military interventions as key to helping some nations get back on the right path, and indeed cites the compelling case of Sierra Leone.[xxxvii] On his estimates, the economic benefits of British force in ending the civil war exceeded the costs by a factor of 32.[xxxviii] The evidence that French colonies are less prone to civil war than their counterparts, owing largely to informal security agreements between the French and newly-independent governments[xxxix], surely buttresses Collier’s claims that post-conflict management must be over the longer term; he argues at least ten years, and events in present-day Iraq and Libya, for example, support such an argument.[xl]

Another radical suggestion is the lowering of trade barriers by OECD countries with respect to African countries, while maintaining such barriers with Asian countries.[xli] It is not clear that the political will for such a proposal exists, but there are many ways further research could motivate this, for example by underlining correlations between poverty and global security threats.[xlii] A more direct technique would also be to emphasise the economic progress of countries with which the US established regional trade hubs (Accra, Gaborone and Nairobi) under the African Growth and Opportunity Act (AGOA)[xliii]. 2015 is indeed an important year to create incentives given the expiry of AGOA on 30 September, and the continued uncertainty regarding its reauthorisation.[xliv] One might also point out that the AGOA proves that OECD countries have the will, and that it is in fact the poorest countries that need to reform their policies. Indeed, one area that may be explored further is the persistent problem of protectionism in bottom billion economies, an issue to be overcome in the implementation of Collier’s proposals. Finally, the reader needs no convincing that the reciprocal nature of the World Trade Organisation is unfair towards the bottom billion.[xlv] Yet while establishing a forum where wealthy countries make concessions on development grounds might be the right thing to do, its realisation depends mostly on how far rich countries can be convinced it is to their benefit too.

Overall, Collier’s ‘The Bottom Billion’ offers well-evidenced explanations for lack of growth in the world’s poorest countries, but it has been argued that the solutions are geared mainly towards kick-starting growth in the bottom billion countries, despite substantial evidence that extreme poverty and inequality are growing for vast swathes of citizens in non-Bottom Billion countries too. In addition, the ingenuity of some of Collier’s solutions – international charters and lowering trade barriers, for example – also happens to be their undoing. Indeed, while the rhetoric for helping the world’s poorest is powerful, it is hard to believe the powers-that-be will implement such proposals in the absence of obvious, short-term gains to themselves. It is notable that the last time such a global development push succeeded was in the late 1940s with the Marshall Plan, but the incentive there was obvious: to resist the spread of communism. Further efforts may now look to galvanising the international community and relevant actors to tackle the varying forms of poverty and inequality in the name of “enlightened self-interest”.[xlvi]

[i] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp.19

[ii] Easterly, William. The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Cambridge, MA: MIT, 2001.

[iii] Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done so Much Ill and so Little Good. New York: Penguin, 2006.

[iv] Sachs, Jeffrey. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin, 2005, pp. 218

[v] Collier, Paul. The Bottom Billion. Ted Talk, May 2008, Retrieved from: http://www.ted.com/talks/paul_collier_shares_4_ways_to_help_the_bottom_billion/transcript

[vi] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 19

[vii] Ibid, pp. 20

[viii] Ibid, pp. 20

[ix] Ibid, pp. 23

[x] North, James. The Roots of the Côte d’Ivoire Crisis, 5 April 2011, Retrieved from: http://www.thenation.com/article/159707/roots-cote-divoire-crisis#

[xi] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 27

[xii] Ibid, pp. 42

[xiii] Ibid, pp. 43

[xiv] Ibid, pp. 44

[xv] Sachs, Jeffrey. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin, 2005, pp. 57

[xvi] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 11

[xvii] Patnaik, Prabhat. “The economics of the New Phase of Imperialism”, International Conference: Acts of Resistance from the South against Globalisation. 2005, pp. 9

[xviii] Sainath, P. “Indexing inhumanity, Indian style”, 2 November 2007, Retrieved from: http://indiatogether.org/index-op-ed

[xix] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 168

[xx] Ibid, pp. 56

[xxi] Ibid, pp. 56

[xxii] Ibid, pp. 58

[xxiii] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 179

[xxiv] Tattersall, Nick. Reverse brain drain as ambitious Nigerians come home, 5 August 2008, Retrieved from: http://www.reuters.com/article/2008/08/06/us-africa-diaspora-nigeria-idUSL143223020080806

[xxv] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 61

[xxvi] Ibid, pp. 79

[xxvii] Meisel, N., & Ould Aoudia, J. (2007). La «bonne gouvernance» est-elle une bonne stratégie de développement. Document de travail de la DGTPE, (2007/11).

[xxviii] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 75

[xxix] Melonio, Thomas. “La non-richesse des nations”, 16 April 2008, Retrieved from: http://www.laviedesidees.fr/Paul-Collier-a-l-ecole-des.html

[xxx] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 100

[xxxi] Ibid, pp. 102

[xxxii] Ghani, A., & Lockhart, C. (2009). Fixing failed states: a framework for rebuilding a fractured world. Oxford University Press.

[xxxiii] McMahon, G. (1997). Applying economic analysis to technical assistance projects (Vol. 1749). World Bank Publications, pp. 4

[xxxiv] Sachs, Jeffrey. The End of Poverty: Economic Possibilities for Our Time. New York: Penguin, 2005, pp. 39

[xxxv] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 139

[xxxvi] Ibid, pp. 139

[xxxvii] Ibid, pp. 132

[xxxviii] Ibid, pp. 134

[xxxix] Fearon, J. D., & Laitin, D. D. (2003). Ethnicity, insurgency, and civil war. American political science review97(01), 75-90.

[xl] Strong, J. (2014). Why Parliament Now Decides on War: Tracing the Growth of the Parliamentary Prerogative through Syria, Libya and Iraq. The British Journal of Politics & International Relations.

[xli] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 160

[xlii] Paolo, Bernadette. US National Security Tied to Africa’s Economic Empowerment, 08 April 2015, Retrieved from: http://agoa.info/news/article/5644-us-national-security-tied-to-africa-s-economic-empowerment.html

[xliii] Mevel, S., Lewis, Z., Kimenyi, M., Karingi, S., Kamau, A., & United Nations. Economic Commission for Africa. (2013). The Africa Growth and Opportunity Act: An Empirical Analysis of the Possibilities Post-2015. Washington, AGI at Brookings and UNECA.

[xliv] Dally, Miles. Level playing fields and no bullying are needed, 30 March 2015, Retrieved from: http://www.iol.co.za/business/opinion/level-playing-fields-and-no-bullying-are-needed-1.1838557#.VS7WEBOG-hg

[xlv] Collier, Paul. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done about It. Oxford: Oxford UP, 2007, pp. 170

[xlvi] Collier, Paul. The Bottom Billion. Ted Talk, May 2008, Retrieved from: http://www.ted.com/talks/paul_collier_shares_4_ways_to_help_the_bottom_billion/transcript

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