Monday, January 18, 2010

Five Second ... Bottom Billion

I finished Paul Collier's The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It last week.

The thing I value most in the book is the different mindset he proposes for considering "poor countries." Rather than dividing the world into 1 billion rich and 5 billion poor people, he further subdivides the poor into two groups: those in countries whose economies are growing regularly, so who - if we do nothing - are expected to become rich eventually; and those in countries that have seen essentially no growth for decades. He avoids making a list of the specific countries, though throughout the book a few names do keep creeping up. He is also careful to point out that this is not "Africa" and "Everyone else," because there are countries in Africa that have made and are making significant progress and countries in other regions that are real trouble.

He proposes four traps that go a bit beyond the typical poverty trap discussion (which even its proponents demonstrate is circular reasoning, see right) by identifying specific features other than poverty that make it a trap. His top four traps are conflict, abundant natural resources, landlocked with bad neighbors, and poor governance. When combined with deep poverty, these factors make it much more difficult for individuals to work their way out of poverty. There is a significant amount of research - much of it his own - behind his descriptions of each trap.

He also presents four policy options that would support countries' exit from these traps in particular circumstances: modest aid policies; invited, committed, long-term military interventions; international laws and standards; and differently-unfair trade practices. Each of them is fun for a long debate by itself.

He does not advocate applying any of these indiscriminately even in the bottom billion. For countries locked in conflict, he recommends using most of them: invited military interventions where donors are committed to having a presence for a decade (but not much more) and to engage rebel groups to reduce the risk of future conflict and reduce payments to domestic military services to prevent coups; aid to competitively fund reconstruction projects; and standards that would dictate the roles of the countries sending support so that it's all less ad hoc.

For natural resource trapped countries, though, his only recommendation is international standards for good governance and resource management practices; and landlocked countries with bad neighbors are likely to have problems for a very long time to come, so just accept that aid will be a long-term factor until outside conditions improve and provide promises of military support to reduce coups.

I am fascinated that nowhere in his matching up of traps and solutions does he mention his trade proposition, which is to give Africa a better deal than Asia. It's not about 'justice' or 'fairness' or other catchy slogans, but would give them a temporary advantage in trade that they currently don't have and won't be able to have in a few years' time once Asia has done more catch up. He would also like to see the WTO add a branch specifically to arrange trade grants for developing countries before each trade round, much as the World Bank added a poverty/grant element to its loaning business.

And for ordinary people?
"The left needs to move on from the West's self-flagellation and idealized notions of developing countries. Poverty is not romantic. The countries of the bottom billion are not there to pioneer experiments in socialism ... The international financial institutions are not part of a conspiracy against poor countries... The left has to learn to love growth. ... Much as I agree with Sachs' passionate call to action, I think he has overplayed the importance of aid. ...

"The right needs to move on from the notion of aid as part of the problem - as welfare payments to scroungers and crooks. ... It has to face up to the fact that these countries are stuck, that competing with China and India is going to be difficult. Indeed, it has to recognize that private activity in the global market can sometimes generate problems for the poorest countries that need public solutions. ... We are not as impotent and ignorant as Easterly seems to think. ...

"Electorates tend to get the politicians they deserve."

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