In his new book, Paul Collier pushes development economists to broaden their approach.
By Sam Boyd
July 31, 2007 | Prospect.org
The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It by Paul Collier (Oxford University Press, 222 Pages)
The last several years have witnessed the sudden growth of a nonfiction genre: the big development book. Each entry typically starts with a discussion of just how poor much of the world is, and then goes on to explain why and what is to be done. Joe Stiglitz, Jagdish Bhagwati, and many other leading economists have contributed, in one way or another, to the massive popular literature on development. Indeed, I can think of no other academic field where top researchers write so many books aimed at the general public.
Most notably, Jeff Sachs argued for vastly expanded aid in The End of Poverty, while William Easterly mocked this approach in his The White Man's Burden. Sachs believes that poor countries are stuck in a "poverty trap" in which the very fact they are poor keeps them from developing further. Under this theory, all the poorest countries need is a large one-time infusion of wealth that will allow them to grow on their own from there. Easterly points out that this notion has scant theoretical support and that no-one has been able to demonstrate that aid beyond 16 percent of GDP does anything to increase growth.
Most development economists are far more sympathetic to Easterly than Sachs. Tellingly, development luminary Abhijit Banerjee recently edited a book called Making Aid Work -- a title which reflects a general consensus that aid, in fact, currently does not work. This pessimistic consensus has left many people yearning for a broader and more hopeful take on the possibilities for development. In his new book, The Bottom Billion, Paul Collier seeks to address that desire and expand those possibilities by looking beyond aid as such.
Collier, former director of development research at the World Bank and now Director of Oxford's Center for the Study of African Economies, states explicitly in the book that he falls somewhere between Sachs's optimism and Easterly's pessimism, but that claim is a bit disingenuous -- Collier actually embraces Easterly's argument about the limitations of aid. But instead of resigning himself to advocating only marginal steps and hoping for limited improvements as Easterly does, he argues for an expansive approach that involves far more than direct monetary aid from the developed world.
Collier begins by pointing out that most of the world is in fact growing. Even many deeply poor countries will, without any direct aid from the developed world, be reasonably wealthy in a few decades time. The Indonesias and Brazils of the world have real problems, but ultimately they are doing fairly well. The most important question in development economics is what to do with the countries that are not. As his title implies, Collier considers the billion or so people who live in these stagnant and primarily African countries and seeks to explain why they remain poor and what can be done about it.
Collier is emphatic that "the central problem of the bottom billion is that they do not have growth." This runs somewhat contrary to the recent fashion in development literature, where any discussion of growth must emphasize how its benefits are distributed, and how its consequences can be made to be entirely benign and just. Collier argues that, as we have enough trouble creating growth at all, trying to manage how exactly its benefits are distributed is bound to end in failure.
The first section of the book lays out four traps developing countries fall into that prevent growth. First, conflict and poverty generate more conflict, which in turn further impoverishes a country. Second, being landlocked makes many kinds of economic activity difficult and dependent on the good will of neighbors. (Africa has by far the most landlocked countries in the world). Third, the existence of valuable natural resources make controlling the government attractive, which encourages bad conduct and makes exports uncompetitive by raising the price of foreign exchange. Finally, bad governance is destructive and self-perpetuating.
This is as lucid and concise an explanation of the problems of the developing world as anyone could want, though it does omit some important factors -- public health first among them. Nonetheless, it is an excellent introduction to the problems that bedevil the poorest countries.
If that were all The Bottom Billion had to offer, it would not be especially new. Fortunately, the second half of the book is concerned with how to break these traps, and this is where things get really interesting. Some of Collier's ideas are relatively moderate -- shifting from direct foreign aid to more technical assistance (that is, expert help given to developing countries with various difficult administrative tasks), establishing independent authorities outside national governments to spend aid monies, and more -- while others are much more radical.
Collier's most controversial proposal is his call for more military interventions by developed countries. Unsurprisingly, this was trumpeted in Niall "Empire" Ferguson's recent New York Times review as if it were the central message of the book. It isn't. Collier views military intervention as one tool among many to break countries out of a cycle of conflict. He points out that, judging by pretty much any metric, the British intervention in Sierra Leone in 2000 was remarkably successful. He also argues that a more public commitment to preventing conflict in developing countries will reduce the likelihood of such conflict occurring at all.
Unfortunately, he doesn't take into account the difficulty of predicting ahead of time the cost or practicality of a military intervention. How confident can Western powers be that a given intervention will turn out like Sierra Leone in 2000 rather than, say, Somalia in 1993? Nonetheless, Collier is correct and courageous to point out that it often is within the power of Western governments to stop untold bloodshed with little effort.
Thankfully, Collier is on more solid empirical ground in his discussion of other potential solutions. His suggested approach to addressing the traps he discusses in the first section is to develop a set of international standards or charters that would make clear what role governments and aid agencies should play in various situations. He points to the Kimberly Process, which has already succeeded in dramatically lowering the price of conflict diamonds, though not at eliminating their trade altogether, as an example.
Most radically for an economist, Collier suggests giving bottom billion countries protection against competition from Asia and India. Those countries have become relatively wealthy by providing extremely cheap labor to the developed world, but it will be difficult for other countries to follow in their footsteps, as Asian and Indian labor costs have not yet risen enough to make moving to bottom billion countries worthwhile for Western companies.
Collier is not overly optimistic -- even if everything he suggests were to be enacted and be as effective as he hopes, it would be a long time before the bottom billion reached the level China is at today -- but he does bring a much needed spirit of optimism to the debate. The feud between Sachs and Easterly has dominated public discussion over development aid for the last several years, but, The Bottom Billion has the potential to break that cycle by broadening the debate. This is the best popular book on development I know of. It is not perfect by any means, but if it gets half as much attention as Sachs and Easterly's offerings, it will move the development discussion forward immensely.