THE BOTTOM BILLION

WHY THE POOREST COUNTRIES ARE FAILING AND WHAT CAN BE DONE ABOUT IT

PAUL COLLIER

OXFORD UNIVERSITY PRESS              2007

PART 1I

PART 1: WHAT’S THE ISSUE

 

Chapter 1: Falling Behind and Falling Apart: The Bottom Billion (Cont.)

Traps, and the countries caught in them

Suppose your country is dirt poor, almost stagnant economically, and that few people are educated. You don’t have to try hard to imagine this condition – our ancestors lived this way. With hard work, thrift, and intelligence, a society can gradually climb out of poverty, unless it gets trapped. Development traps have become a fashionable area of academic dispute, with a fairly predictable right-left divide. The right tends to deny the existence of development traps, asserting that any country adopting good policies will escape poverty. The left tends to see global capitalism as inherently generating a poverty trap.

The concept of a development trap has been around for a long time and is most recently associated with the work of the economist Jeffrey Sachs, who has focused on the consequences of malaria and other health problems. Malaria keeps countries poor, and because they are poor the potential market for a vaccine is not sufficiently valuable to warrant drug companies making the huge investment in research that is necessary. This book is about four traps that have received less attention: the conflict trap, the natural resources trap, the trap of being landlocked with bad neighbors, and the trap of bad governance in a small country. Like many developing countries that are now succeeding, all the countries that are the focus of this book are poor. Their distinctive feature is that they got caught in one or another of the traps. These traps are not inescapable, however, and over the years some countries have broken free of them and then started to catch up. Unfortunately, that process of catching up has itself recently stalled. Those countries that have only broken clear of the traps during the last decade have faced a new problem: the global market is now far more hostile to new entrants than it was in the 1980s. The countries newly escaped from the traps may have missed the boat, finding themselves in a limbo-like world in which growth is constrained by external factors; this will be the theme of my discussion of globalization. When Mauritius escaped the traps in the 1980s it rocketed to middle-income levels; when neighboring Madagascar finally escaped the traps two decades later, there was no rocket.

• Most countries have stayed clear of any of the traps that are the subject of this book. But countries with a combined population of around one billion people have got caught in them.
• In defining these traps I have to draw lines somewhat arbitrarily, and this creates gray areas.
• Given the way I have drawn the lines, as of 2006 there are around 980 million people living in these trapped countries.
• Since these populations are growing, by the time you read this the figure will be hovering around the one billion mark.
• Seventy percent of these people are in Africa, and most Africans are living in countries that have been in one or another of the traps. Africa is therefore the core of the problem.
• The countries of the bottom billion do not form a group with a convenient geographic label. When I want to use a geographic label for them I describe them as “Africa +”, with the + being places such as Haiti, Bolivia, the Central Asian countries, Laos, Cambodia, Yemen, Burma, and North Korea.

I have identified 58 countries that fall into this group, which highlights one typical feature – they are small. Combined, they have fewer people than either India or China. And since their per capita income is also very low, the income of the typical country is negligible, less than that of most rich-world cities. Because this is not company that countries are keen to be in, and because stigmatising a country tends to create a self-fulfilling prophecy, I will not present a list of these countries. Rather, I will give plenty of examples in each of the traps.

• In the bottom billion life expectancy is 50 years, whereas in the other developing countries it is 67 years.
• Infant mortality – the proportion of children who die before their 5^th birthday – is 14% in the bottom billion, whereas in other developing countries it is 14%
• The proportion of children with symptoms of long-term malnutrition is 36% in the bottom billion as against 20% for the other developing countries.

 

The role of growth in development

Has this gap between the bottom billion and the rest of the developing world always been there, or has it come about because the bottom billion have been trapped? To find out, we have to disaggregate the statistics that have been used in the past to describe all the countries that we label as “developing.” Here’s a hypothetical example. Prosperia has a big economy that is growing at 10%, but the country has only a small population. Catastrophia is a small economy declining at 10%, but it has a large population. The usual approach – employed, for example, by the International Monetary Fund (IMF) in its flagship publication World Economic Outlook – is to average figures that relate to the size of a country’s economy. On this approach, Prosperia’s large, growing economy skews the average upward, and so in aggregate the two countries are described as growing. The problem is that this describes what is going on from the perspective of the typical unit of income, not from the perspective of the typical person. Most units of income are in Prosperia, but most people are in Catastrophia. If we want to describe what the typical person experiences in the countries of the bottom billion, we need to work with figures based not on a country’s income but on its population. Does it matter? Well, it does if the poorest countries are diverging from the rest, which is the thesis of this book, because averaging by income dismisses the poorest countries as unimportant. The experience of their people does not count for much precisely because they are poor – their income is negligible.

When we get the data appropriately averaged, what do we find? Those developing countries that are not part of the bottom billion – the middle four billion – have experienced rapid and accelerating growth in per capita income. Let’s take it decade by decade. During the 1970s they grew at 2.5% a year, hopeful but not remarkable. During the 1980s and 1990s their growth rate accelerated to 4% a year. During the first few years of the 21^st century it accelerated again to over 4.5%. These growth rates may not sound sensational, but they are without precedent in history. They imply that children in these countries will grow up to have lives dramatically different from those of their parents. Even where people are still poor, these societies can be suffused with hope: time is on their side.

But how about the bottom billion? Let’s again take it decade by decade. During the 1970s their per capita income rose at 0.5% a year, so they were becoming slightly better off in absolute terms but at a rate that was likely to be barely perceptible. Given the high degree of volatility of individual incomes in these societies, the slight overall tendency to improvement is likely to have been drowned by these individual risks. The overall tenor of the society will have been dominated by individual fears of falling rather than hope coming for society-wide progress. But in the 1980s the performance of the bottom billion got much worse, declining at 0.4% a year. In absolute terms, by the end of the 1980s they were back to where they had been in 1970. If you had been living in these societies over that full sweep of 20 years, the only economic experience was of individual volatility: some people went up and some went down. There was no society-wide reason for hope. And then came the 1990s. This is now seen as the golden decade, between the end of the Cold War and 9/11 – the decade of the cloudless sky and booming markets. It wasn’t so golden for the bottom billion: their rate of absolute decline accelerated to 0.5% a year. By the turn of the millennium they were therefore poorer than they had been in 1970.

• The problems that afflict the gathering of economic data in the poorest countries are likely overall to have caused an underestimate of their decline.
• For the countries that have really fallen apart, there are no usable data.
• The estimated decline among the bottom billion during the 1990s does not include Somalia and Afghanistan. Excluding them is equivalent to assuming that their performance was exactly at the average for the group.
• The star growth performer among all the economies of the bottom billion has been Equatorial Guinea. This is a small country of coups and corruption where offshore oil was recently discovered and now dominates income.

Think about what these two sets of growth rates imply. During the 1970s the bottom billion diverged in growth from the rest of the developing world by 2% a year. So even then the main feature of the societies in the bottom billion was divergence, not development. But the situation soon became alarmingly worse. During the 1980s the divergence accelerated further to 4.4% a year, and during the 1990s it accelerated to an astonishing 5% a year. Taking the three decades as a whole, the experience of the societies in the bottom billion was thus one of massive and accelerating divergence. Given the power of compound growth rates, these differences between the bottom billion and the rest of the developing world will rapidly cumulate into two different worlds. Indeed, the divergence has indeed already pushed most of the countries of the bottom billion to the lowest spot in the global pile.

• Over the next two decades the true nature of the problem is going to become apparent because the countries that are trapped in stagnation or decline are now pretty well the poorest.
• Picture this as a billion people stuck in a train that is slowly rolling backward downhill.
• So far I have couched the problem of the bottom billion in terms of growth rates: these countries’ growth rate has been negative in absolute terms, and in relative terms massively below the rest of the developing world.
• While I was directing the World Bank’s research department, the most controversial paper we produced was one called “Growth Is Good for the Poor”.
• Some NGOs hated it, and it was the only time in five years that Jim Wolfensohn, the Bank’s president, phoned me to voice his concern.
• Yet the central problem of the bottom billion is that they have not grown.
• For policies in the rich world to become more supportive of growth in these societies, we will need the full lobbying power of those who care about the world’s poor.
• We cannot make poverty history unless the countries of the bottom billion start to grow, and they will not grow by turning them into Cuba.
• To my mind, 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.
• Catching up is about radically raising growth in the countries now at the bottom.

 

Beyond the headless heart: Accepting complexity

• The problem of the bottom billion is serious, but it is fixable. But like most serious problems, it is complicated.
• Change is going to have to come from within the societies of the bottom billion, but our own policies could make these efforts more likely to succeed, and so more likely to be undertaken.
• To make development policy coherent will require what is termed a “whole-of-government” approach.
• It will require joint action across major governments.

The only forum where heads of the major governments routinely meet is the G8. Addressing the problem of the bottom billion is an ideal topic for the G8, but it means using the full range of available policies and so going beyond the Gleneagles agenda of 2005, which was a pledge to double aid programs. Africa is already back on the G8 agenda for the 2007 meeting in Germany. “Africa+” should rightly stay on the G8 agenda until the bottom billion are decisively freed from the development traps. This book sets out an agenda for the G8 that would be effective.

PART 2: THE TRAPS

Chapter 2: The Conflict Trap