THE BOTTOM BILLION

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

PAUL COLLIER

OXFORD UNIVERSITY PRESS 2007

PART VII

PART 5: THE STRUGGLE FOR THE BOTTOM BILLION

Chapter 11: An Agenda for Action

We have been through the costs that the countries of the bottom billion are inflicting on themselves, on each other, and on us. I have tried to put some numbers on the cost of a civil war and the cost of a failing state. They are big numbers. But really it is not necessary to be that sophisticated. I have a little boy who is six. I do not want him to grow up in a world with a vast running sore – a billion people stuck in desperate conditions alongside unprecedented prosperity.

And stuck they will be. Clearly there are brave people within these societies who are struggling to achieve change. It is important to us that these people win their struggle, but the odds are currently stacked against them. We have been through the traps: conflict, natural resources, being landlocked, bad governance. They have kept these countries stagnant for forty years, and I do not see much reason for the next couple of decades to be very different. Will globalization improve the situation? We have been through what it is likely to do for the countries at the bottom. Trade is more likely to lock them into natural resource dependence than to open new opportunities, and the international mobility of capital and skilled workers is more likely to bleed them of their scanty capital and talent than to provide an engine of growth.

If the world is like that in two decades, then, given my profession, my son is going to ask me what I did to avoid it. It has been easy for me to do something: I have written this. But do not think that just because your work is unconnected with development you are off the hook. You are a citizen, and citizenship carries responsibilities. In the 1930s the world sleepwalked into the avoidable catastrophe of World War II because electorates in the United States and Europe were too lazy to think beyond the populist recipes of isolationism and pacifism. These mistakes led to the slaughter of their children. It is the responsibility of all citizens to prevent us from sleepwalking into another avoidable catastrophe that our children would have to face.

And avoidable it is. In this book we have discussed four instruments: aid, security, laws and charters, and trade. Each of these has some bite, yet at present we are using the first quite badly and the three others scarcely at all. Why have the governments of rich countries been so incompetent?

Electorates get what they deserve. Popular thinking on development is fogged by lazy images and controversies: “Globalization will fix it” versus “They need more protection,” They need more money” versus “Aid feeds corruption,” “They need democracy” versus “They’re locked in ethnic hatreds,” “Go back to empire” versus “Respect their sovereignty,” “Support their armed struggles” versus “Prop up our allies.” These polarizations are untenable, and I hope that you have picked up some sense of how quantitative research on these issues challenges them.

It is now time to pull it all together. In Part 2 we went through the traps, and in Part 4 we went through the instruments. It is now time to relate the instruments to the traps. Not everything is appropriate everywhere. Trap by trap, what combination of instruments is likely to be most effective?

The other key question concerns who is going to make all this happen. Since there is no world government, what is the realistic balance of actions between the rich countries and the bottom-billion societies themselves? Which actions need to be done cooperatively, and how might that happen? Given that even within each group coordination is so difficult, what is the minimum that we can get away with, and how might it be achieved?

What needs to happen?

Breaking the conflict trap

The conflict trap has two points of intervention: postconflict and deep prevention.
Since around half of all civil wars are postconflict relapses, and since these happen in only a few countries, getting a postconflict intervention to work better is a good place to start.
We can more or less forget about trade.
Aid to postconflict societies used to be too little too soon. The crushing needs of the early postconflict period collide with government incapacity.

One way around this is to deliver the key basic services through the independent service authority model: competing organizations provide the services on the ground while the authority finances and scrutinizes their performance. This would enable donors to coordinate, pooling funds into the authority. They could, of course, co-ordinate through budget support, but many postconflict governments are just too weak for this to be wise. It will usually make sense for donors to fund traditional projects to restore infrastructure, but they will need exceptionally substantial supervision both to ensure success and to guard against corruption.

Security in postconflict societies will normally require an external military presence for a long time.
In Chapter 9, I proposed a charter for postconflict governance. International actors have had huge power in postconflict situations and have usually been embarrassed to use it because of accusations of infringing upon sovereignty.

So in postconflict situations three of the four instruments are really important. Aid has already improved a lot, military intervention is improving (or at last it was until Iraq), and charters are currently far behind. Therefore, the most pressing agenda is getting a charter promulgated.

How about conflict prevention? Prevention requires all four instruments because it comes close to being synonymous with development. Recall that the deep risk factors are now low income, slow growth, and dependence upon primary commodities. Thus conflict prevention is really about breaking all of the other traps.

Breaking the natural resource trap

Many of the bottom billion are resource-rich and policy-poor. In these countries providing more finance through aid misses the point. Our trade policy doesn’t have much potential, either, since these countries are going to find it difficult to diversify their exports because of Dutch disease, regardless of any preferences we might give them.

They may well need military assistance from time to time, inasmuch as natural resource wealth makes a country more prone to conflict.
The key instrument of intervention is likely to be our own laws and international norms.
We need that charter for resource wealth – something like a revised version of the Extractive Industries Transparency Initiative.
Our public inaction does not mean that the rich world is passive; it means that the powerful forces of gloabalization continue to side with the political crooks in these societies.

Lifelines for the landlocked

The landlocked must depend upon more fortunate neighbors making the most of their opportunities, and so for the landlocked trap to be broken the other traps must be broken first. But there is still much that we can do to mitigate the problem.
Aid – yes, certainly, and on a substantial scale. We should also be giving some aid to the neighbors, earmarked for transport corridors.

Our trade policy does not have that much traction for the development of the landlocked because of the natural barrier of transport costs. However, especially for the countries of the Sahel, which, though landlocked, are close to Europe, air freight offers a potential lifeline into European markets. The key export products are likely to be high-value horticulture, and so European trade policy does matter.

Breaking the reform impasse in failing states

Reform in these countries has to come from within, and it takes courage. Vested interests can be relied upon to use their power, resources, and ingenuity to oppose change.
… Two of these three brave men are currently exiles. The third has placed his family in Europe due to death threats.
What we are called upon to do is the safe task of making it easier for such people to win their struggle.
Aid can most surely help, but it can also hinder, and so it should be offered intelligently.
After Iraq, even the most ghastly dictators are safe from external military intervention. Regime change has to rely on other means.
In regard to trade policy, it is a bit premature in these early reform environments to look to export diversification as a big driver of growth.
Our laws are going to be critical in reining in corruption.
International charters can provide reformers both with an instrument with which to berate poor performance and with a goal around which to unite. That is why international charters will be opposed.

Breaking out of limbo

Some of the coastal, resource-scarce countries managed during the 1990s to break out of the traps, but it was too late: China and India were already established on the block in global markets, making the entry of latecomers much harder.
Remember that aid is a two-edged sword.
It is hard to imagine circumstances in which military intervention would be useful in helping countries to break into global markets.
While laws and charters are not directly useful for export diversification, an investment charter would encourage private investment.
Without effective temporary protection against the Asian giants, the countries of the bottom billion will not break into new global markets.

Who should make it happen?

There is no world government. Remedying the problems of the bottom billion is a global public good, and so, like the provision of all such public goods, it is going to be difficult.

Mobilizing changes in aid policy

The key obstacle to reforming aid is public opinion. Using aid strategically to promote growth in the bottom billion is not high on the agendas of politicians.
Aid agencies should become increasingly concentrated in the most difficult environments. That means that they will need to accept more risk, and so a higher rate of failure.
They have to prioritize long-term social objectives rather than short-term opportunities for reform and growth. They have to give unconditional debt relief.

Mobilizing changes in military intervention

Public opinion is vital for appropriate military intervention. It would help a lot if countries other than the United States, Britain, and France took up a greater share of the burden.

Mobilizing changes in our laws and the promulgation of international charters

The big obstacle to changing our own laws is the free rider problem. Remember, each country would rather not act alone and disadvantage its firms.

The NGOs can overcome the free rider problem that constrains each government. In effect we need an alliance between the NGOs and the OECD, which is the bureaucracy for intergovernmental coordination.
The promulgation of charters can be done by several processes. The Extractive Industries Transparency Initiative was launched by the British government. That was enough to get it started, and it has progressed well.
Budget processes would lodge most naturally with the IMF.
The charter for postconflict governance could be promulgated by the new Peace-Building Commission of the United Nations.
One body that could propose political standards would be the European Commission and/or the British Commonwealth.
Another possible way of promulgating political standards is through clubs. What is needed is small new clubs of the like-minded, adopting standards that set them apart but which are capable of expansion – essentially, open-access clubs of adherence to charters.

Mobilizing changes in trade policy

With trade policy, self-interest meets ignorance and duly manipulates it. Rich country protectionism masquerades in alliance with antiglobalization romantics and third world crooks.
For trade policy to become an instrument of development, ministries of trade have to be ordered to change their priorities from extracting the best bargain to fostering development in the bottom billion.

Problems of coordination

Within each government the four instruments are lodged in different ministries.
Because four different branches of government need to be coordinated, the only level of government likely to be effective is the top.
The other coordination problem is between governments. This is the public-good problem of free riders – fixing the problem of the bottom billion would help everyone, so let’s hope someone else does it.
If the G8 imagines that it has fixed the problem of the bottom billion by doubling aid to Africa at the 2005 summit, it had better do a reality check.
The rich world has a strong collective interest in coordinating its policies to support the bottom billion regardless of its internal disagreements on other matters.

Problems of focus

The Millennium Development Goals were in one sense a big advance, encouraging people to shift their agenda from inputs to outcomes: halving poverty, getting children in school, and so forth. But despite this advance, the goals have two weaknesses, both involving lack of focus.

The first critical lack of focus is that the MDGs track the progress of five billion of the six billion people on our planet.
The price we pay is that our efforts are spread too thin, and the strategies that are appropriate only for the countries at the bottom get lost in the general babble.
The other critical lack of focus is on strategies to achieve the goals. Growth is not a cure-all, but the lack of growth is a kill-all.
The failure of the growth process is the overwhelming problem that we have to crack.
The same approach is not going to work everywhere, but neither is each country utterly distinctive.
Governments in the countries of the bottom billion need to develop strategies appropriate for their circumstances.

What can ordinary people do?

Our approach toward the bottom billion has been failing. Many of these societies are heading down, not up, and they are collectively diverging from the rest of the world. If we let this continue, our children are going to face an alarmingly divided world and all its consequences.

At present the clarion call for the left is Jeffrey Sachs’ book The End of Poverty. Much as I agree with Sach’s passionate call to action, I think that he has overplayed the importance of aid.
Aid alone will not solve the problems of the bottom billion – we need to use a wider range of policies.
The right needs to move on from the notion of aid as part of the problem – as welfare payments to scroungers and crooks.
At present the clarion call for the right is economist William Easterly’s book The White Mans Burden.

So how does this involve ordinary people in rich societies? A classic example in the rich democracies is something called the “political business cycle.” For years governments routinely spent money just before an election to artificially boost the economy, facing up to the consequent mess only once reelected. Eventually, electorates wised up to what was happening, and so the ploy no longer pulled in the votes. As a result, politicians now rarely try it. That sort of learning has to happen across the range of policies needed for the bottom billion. These shifts in thinking depend upon ordinary citizens – people who manage to read to the end of a book. Of course, in a book of this length I cannot set out all the evidence. But I hope that I have convinced you of three central propositions, each unfortunately fairly novel, that encapsulates how thinking needs to change.

The first is that the development problem we now face is not that of the past forty years: it is not the five billion people of the developing world and the Millennium Development Goals that track their progress. It is a much more focused problem of around a billion people in countries that are stuck. This is the problem we are going to have to tackle, and if we stick with present efforts, it is likely to be intractable even as the dashboard indicators of world poverty get better and better.

The second is that within the societies of the bottom billion there is an intense struggle between brave people who are trying to achieve change and powerful groups who oppose them. The politics of the bottom billion is not the bland and sedate process of the rich democracies but rather a dangerous contest between moral extremes. The struggle for the future of the bottom billion is not a contest between an evil rich world and a noble poor world. It is within the societies of the bottom billion, and to date we have largely been bystanders.

The third is that we do not need to be bystanders. Our support for change can be decisive. But we will need not just a more intelligent approach to aid but complementary actions using instruments that have not conventionally been part of the development armory: trade policies, security strategies, changes in our laws, and new international charters.

In short, we need to narrow the target and broaden the instruments. This should be the agenda for the G8.

The Bottom Billion Part 7