Development remains the most pressing human question in economics. As interesting as stock market models might be or monetary policy in managing the business cycle, the most fundamental question in economics is that of growth. What leads to economic growth? And how can those who are poorest realize the benefits of growth?
Every few years a book comes along that makes a significant contribution to our thinking about those most important questions. One thinks of the work a few years ago of Hernando de Soto in The Mystery of Capital, which proposed thinking about the slum-dwellers of Latin America as potential entrepreneurs, if only they could access the small capital locked away in their slum dwellings.
A similarly important contribution has been made by Paul Collier, professor of economics and director of the Centre for the Study of African Economies at Oxford University. A former director of development research at the World Bank, he is a specialist in the economic plight of Africa. Hence his recent book, The Bottom Billion, focuses mainly, but not exclusively, on Africa.
© Jon Ng. Image from sxu.hu
Collier begins by making distinctions in the developing world. Of the world’s roughly six billion people, one billion live in the rich countries. Four billion, including those in China and India, live in countries that are developing, indeed quite rapidly. That leaves the “bottom billion”—the poorest who live in countries that are not developing at all, and are actually falling behind what can properly be called the “developing world.” The bottom billion is not exclusively African, but most Africans belong to it, along with “places such as Haiti, Bolivia, the Central Asian countries, Laos, Cambodia, Yemen, Burma, and North Korea.” Collier includes fifty eight countries in his bottom billion, and they are all small nations with very low incomes.
Much development literature looks at the developing four billion or includes the bottom billion along with countries that are doing much better. Collier notes that the World Bank has large offices in every major middle-income country (the middle four billion) but not a single person resident in the Central African Republic. Collier’s book corrects that oversight, and it is critical, for the happy truth is that the majority of the world’s population is developing, and well on its way to becoming no longer poor. That is good news not heard often enough.
“The middle four billion have experienced rapid and accelerating growth in per capita income,” Collier writes. During the 1970s, such growth was 2.5 percent per year, in the 1980s and 1990s it was 4 percent, and in this decade thus far, 4.5 percent. “These growth rates may not sound sensational, but they are without precedent in history. … Even where people are still poor, these societies can be suffused with hope; time is on their side.”
In contrast, the bottom billion experienced negligible growth, and then absolute decline. By 2000 they were poorer than they were in 1970—societies suffused with despair and diverging dramatically from a world in which everyone else is rich or getting richer. Why?
Collier explains by way of sketching four traps into which the bottom billion have fallen: armed conflict, distortions due to natural resource riches, being landlocked with bad neighbors, and bad governance in a small country. He marshals an impressive array of data, ingeniously researched and interpreted, to show how the bottom billion are in situations in which development is very unlikely.
Civil war, for example, eats up resources and hampers economic growth. But in a low income country without economic growth, the likelihood of civil war is greater—in the absence of hope for a better economic day, seizing the spoils of the state is comparatively more attractive. It is not poverty that produces conflict, Collier argues, but the absence of prospects of growth. The killer effect is that once armed conflict takes root, it can become a trap out of which it is difficult to escape, for civil war diminishes growth.
Another factor Collier identifies is being landlocked with scarce resources. Countries with scarce natural resources, unable to live off the land, need to live off their labor—manufacturing. But getting manufactures to market in a small, landlocked country is difficult, especially if you have bad neighbors. Why is Africa in such trouble? Consider that in the whole developing world excluding Africa, Collier reports that only 1 percent lives in countries that are both land-locked and resource-scarce. In Africa, fully 30 percent live in such countries—countries that, absent colonial map-drawing, have no economic reason to exist.
Collier is at his best when looking at how natural resources (oil, minerals) can encourage conflict, exacerbate bad governance, and enervate nascent manufacturing if those windfall revenues come too early to countries dealing with the other poverty traps.
Collier writes in plain English and has a biting sense of humor, but often it is a case of laughing because the only alternative would be to weep. It is a bleak picture for the bottom billion, especially when Collier argues that they may have missed the boat on the opportunities from globalization. So abundant are the supplies of cheap labor in Asia that there is no prospect of low-wage manufacturing jobs heading to the bottom billion anytime soon.
What then is to be done? Collier does not blanch from bold solutions. Most small country armed conflicts and coups can be stopped relatively cheaply by intervention from abroad, which he advocates, insisting that the lesson from Iraq cannot be “never intervene.” Rich country governments could at least stop facilitating bad governance by refusing to accept the ill-gotten gains of corrupt regimes in their banks. Greater transparency in natural resource payments might correct some of the abuses that skyrocketing oil prices are permitting. On trade, the goal is to use favorable trade policies to “prime the pump” for bottom billion exports—they need to be included in the network of entrepreneurship and exchange.
“Let me be clear: we cannot rescue them,” Collier writes. “The societies of the bottom billion can only be rescued from within. In every society of the bottom billion there are people working for change, but usually they are defeated by the powerful internal forces stacked against them. We should be helping the heroes. So far, our efforts have been paltry: through inertia, ignorance, and incompetence, we have stood by and watched them lose.”
Identifying losers is not a happy task. But offering creative ways to understand the losses with a view to correcting them is a signal service. The Bottom Billion does just that for those who need it most.
Father Raymond J. de Souza, editor of Religion & Liberty, studied economics at Queen’s University in Kingston, Ontario, and the University of Cambridge before his theological studies for the priesthood.
