Sunday, 18 September 2011

Book Review: The Bottom Billion (Paul Collier)

Book title: The Bottom Billion - Why the poorest countries are failing and what can be done about it?
Author: Paul Collier
Website links:

"Collier sheds much light on how the world should tackle its biggest moral challenge. [He] shows, too, how far western governments and other external actors are from currently giving the sort of help these countries desperately need."
Martin Wolf, Financial Times"Development is about giving hope to ordinary people that their children will live in a society that has caught up with the rest of the world" (page 12).This is quite simply an arresting and provocative read as Harford's review suggests on the front cover. A must for all students and teachers with a passion for Development Geography and Economics. Collier opens by reminiscing of his days in Oxford as a student but quickly makes the bold (and well-known but not often discussed) statement that "the countries now at the bottom are distinctive not just in being the poorest but also in having failed to grow (link to Sachs); he goes onto to criticise the MDGs (the basis of Scah's solution) as they talk about poverty reduction when they should focus on growth rates. Collier aims to shatter the media saturated image and attitude towards the poor - that it is their fault because of rebels, starving children, heartless businesses and crooked politicians. Collier states in his open paragraph that "the real challenge of development is that there is a group of countries at the bottom that are falling behind, and often falling apart" (page 3). He asks the obvious question of why? All societies used to be poor. most are now lifting out of it; why are the others stuck? The answer he concludes and argues or the duration of the book is: traps. He refers at this point to the work of Sachs and popularised concept of the Development trap - Collier though wants to focus on 4 traps that receive less attention as he puts it: 1. the conflict trap (Chap 2: civil war  & coups) - without growth peace is considerable more difficult pg372. the natural resource trap ( or the resource curse or "Dutch Disease" - resource exports cause country's currency to rise in value against other currencies = makes the country's other export activities uncompetitive. Yet these activities might have been the best vehicles for technological progress). Collier argues that it is the survival of the fattest and that democracy undermines the ability to harness resource surplus as they often underinvest with too many white elephant projects. But autocracy does not work in these societies either due to ethnic diversity - the only exception is Botswana. 3. the trap of being landlocked with bad neighbours - probably the best quote of the book "Among economists there has been the realisation over the past decade that geography matters" (pg 54 - link to Sachs, Krugman and Venables). Four reasons: i) transport costs & the level of transport infrastructure of their neighbours e.g, Why is Uganda so poor when Switzerland is so rich? ii) The dependency of landlocked countries on their neighbours markets indirectly but also directly. iii) In general all countries, whether landlocked or not, benefit from the growth of their neighbours: growth spills over - many of Africa's countries are inward looking - no spill over!4. the trap of bad governance in a small country. What matters is determined by differences in opportunities - why is bad governance so persistent in some environments? A: Not everybody loses from it - it pays to keep their citizens ill informed and poorly educated. Also, little popular enthusiasm for economic reform as it has a bad name/brand due to the 1980s IMF reforms (headed by Thatcher & Reagan).Collier then assesses whether globalisation (defined by 3 flows: flows of capital / trade in goods / migration of people pg 80) can rescue those countries in the bottom billion...
"I think the sad reality is that although globalisation has powered the majority of developing countries towards prosperity, it is now making things harder for these latecomers" (pg80) -  esp in the context of economies of agglomeration & outsourcing/delocalisation to the East(Asia). Therefore, export diversification is more difficult for the bottom billion. Collier states that the bottom billion have missed the boat.

He concludes with "based on present trends, it seems more likely (globalisation) to lock yet more of the bottom billion countries into the natural resource trap then to save them through export diversification" (pg 87). To play in the global economy you need to break free from traps!

Collier finally discusses the solutions looking at both tried and tested as well as innovative schemes:

1. Aid to the rescue? (chapter 7) Without aid countries of the bottom billion would have become much poorer but the problem with aid he argues is that it is subject to diminishing returns e.g. the first million dollars is more productive than the second etc So this leads to statistics like 40% of Africa's military spending is financed by aid (pg103). Collier argues that Development aid should focus on infrastructure development as well as giving country's ownership of aid programs. He concludes by stating that " aid is part of the solution rather than part of the problem. The challenge is to complement it with other actions" (pg123). 

2. Military Intervention? Collier attempts to persuade the reader that external military intervention has an important place in helping societies by arguing that catastrophe's like Somalia in October 1993 should not mean that 'we never intervene' - he refers to how the world stood and watch Rwanda tear itself apart as a poignant example to reinforce his point. He argues that the benefits of intervention are 30 times the cost of we should intervene but not necessarily everywhere.

3. Laws and Charters? Collier puts forward the notion of global charters on issues like budget transparency, natural resource revenues, democracy, and investment create global public goods, which are grossly undersupplied - but as he states getting people to abide bu them is the tricky part. 

4. Trade Policy for reversing marginalisation?
 - Is Fair Trade the Answer? The problem Collier argues is that is encourages recipients to stay doing what they are doing - growing coffee. He goes onto say that "a key economic problem for the bottom billion is that producers have not diversified out of a narrow range of primary commodities. The paradox is that they get charity as long as they stay producing the crops that have locked them into poverty!" (page 163). 
 - Export Diversification (and protection from Asia) is a feasible solution but Collier points out that protection from Asia must occur otherwise the bottom billion are doomed until Asia becomes rich. Collier points out that this is already happening in the form of the African Growth and Opportunity Act (AGOA). 

Collier concludes in his chapter entitled 'An agenda for action' and summaries what needs to happen: breaking the conflict trap; breaking the natural resource trap; lifelines for the landlocked (aid & transport corridors); breaking out of the reform impasse and limbo. he then goes onto to suggest WHO should make it happen: he argues that aid agencies should move away from photo opp aid for politicians and towards becoming increasingly concentrated int eh most difficult environments (at present they are spread too thinly) - the big problem of our charters is the free rider problem ( each country would rather not act alone & disadvantage its firms). He suggests that the MDGs lack focus.

In short, as Collier lucidly states the failure of growth is the problem we need to address and lest we not forget that capitalism is working for the majority of countries(but not the bottom billion) and so  in short we "need to narrow the target and broaden the instruments" (page 192)

Overall a very intriguing book with a more defined purpose than Sach's i feel.

JSB Sept 2011