Saturday, July 7, 2007
THE BOTTOM BILLION - % in Africa
The Least Among Us
By NIALL FERGUSON
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THE BOTTOM BILLION
Why the Poorest Countries Are Failing and What Can Be Done About It.
By Paul Collier.
205 pp. Oxford University Press. $28.
It is perhaps a sign of how far sub-Saharan Africa still has to go that the most vigorous — and certainly the best publicized — debate about its economic future in recent years has been between two American economists based in New York. On one side of the argument is Jeffrey D. Sachs, the director of the Earth Institute at Columbia University and the author of “The End of Poverty.” On the other is William Easterly of New York University, whose ironically titled “White Man’s Burden” lampoons Sachs as a modern version of a 19th-century utopian.
There is indeed something faintly Victorian about Sachs’s messianic yet parsimonious conviction that Africa can be saved with $75 billion a year in Western aid. Having spent so much of his energies in the 1990s extolling the virtues of the free market to any Eastern European government that would listen, Sachs now argues — with equally unshakable conviction — that the elimination of African poverty can be achieved through state planning. All governments need do is improve agricultural technology, provide antimalaria bed nets, treat diseases like hookworm and distribute antiretroviral treatments to the H.I.V.-infected.
At times, he is rather reminiscent of Dickens’s Mrs. Jellyby in “Bleak House,” “a lady of very remarkable strength of character, who ... has devoted herself to an extensive variety of public subjects, at various times, and is at present (until something else attracts her) devoted to the subject of Africa; with a view to the general cultivation of the coffee berry — and the natives.” In Easterly’s opinion, the present generation of white philanthropists is no more likely than earlier ones to succeed in a self-appointed (and at times unwittingly imperial) mission of enlightening the Dark Continent.
Now comes another white man, ready to shoulder the burden of saving Africa: Paul Collier, the director of the Center for the Study of African Economies at Oxford University. A former World Bank economist like Easterly, Collier shares his onetime colleague’s aversion to what he calls the “headless heart” syndrome — meaning the tendency of people in rich countries to approach Africa’s problems with more emotion than empirical evidence. It was Collier who pointed out that nearly two-fifths of Africa’s private wealth is held abroad, much of it in Swiss bank accounts. It was he who exposed the British charity Christian Aid for commissioning dubious Marxist research on free trade. And it was he who pioneered a new and unsentimental approach to the study of civil wars, demonstrating that most rebels in sub-Saharan Africa are not heroic freedom fighters but self-interested brigands.
Collier is certainly much closer to Easterly on the question of aid. (He cites a recent survey that tracked money released by the Chad Ministry of Finance to help rural health clinics. Less than 1 percent reached the clinics.) Yet “The Bottom Billion” proves to be a far more constructive work than “The White Man’s Burden.” Like Sachs, Collier believes rich countries really can do something for Africa. But it involves more — much more — than handouts.
Collier’s title refers to the 980 million people living in what he calls “trapped countries,” those that are “clearly heading toward what might be described as a black hole.” Not all these people are Africans. Some live in Bolivia, Myanmar, Cambodia, Haiti, Laos, North Korea and Yemen. But 70 percent of the bottom billion live in Africa, and there is good reason to expect that proportion to rise.
The notion of the bottom billion matters because most of today’s development strategies (for example, the United Nations’ Millennium Development Goals) focus much less discriminatingly on all developing economies — what used to be called “the third world.” But the world is no longer (as it used to be) one-sixth rich and five-sixths poor. Thanks to explosive growth in Asia, it will soon be more like one-sixth rich, two-thirds O.K. and one-sixth poor. It is this last group, according to Collier, that we need to worry about. Average life expectancy for the bottom billion is just 50 years. Around one in seven children dies before the age of 5.
Collier’s is a better book than either Sachs’s or Easterly’s for two reasons. First, its analysis of the causes of poverty is more convincing. Second, its remedies are more plausible.
There are, he suggests, four traps into which really poor countries tend to fall. The first is civil war. Nearly three-quarters of the people in the bottom billion, Collier points out, have recently been through, or are still in the midst of, a civil war. Such wars usually drag on for years and have economically disastrous consequences. Congo (formerly Zaire, formerly the Belgian Congo) would need 50 years of peace at its present growth rate to get back to the income level it had in 1960. Unfortunately, there is a vicious circle, because the poorer a country becomes, the more likely it is to succumb to civil war (“halve the ... income of the country and you double the risk of civil war” is a characteristic Collier formulation). And once you’ve had one civil war, you’re likely to have more: “Half of all civil wars are postconflict relapses.”
Why, aside from their poverty, have so many sub-Saharan countries become mired in internal conflict? Collier has spent years trying to answer this question, and his conclusions are central to this book. Civil war, it turns out, has nothing much to do with the legacy of colonialism, or income inequality, or the political repression of minorities. Three things turn out to increase the risk of conflict: a relatively high proportion of young, uneducated men; an imbalance between ethnic groups, with one tending to outnumber the rest; and a supply of natural resources like diamonds or oil, which simultaneously encourages and helps to finance rebellion.
It was in fact Collier who first came up with the line “diamonds are a guerrilla’s best friend,” and a substantial part of this book concerns itself with what economists like to call the “resource curse,” his No. 2 trap. As he sees it, the real problem about being a poor country with mineral wealth, like Nigeria, is that “resource rents make democracy malfunction”; they give rise to “a new law of the jungle of electoral competition ... the survival of the fattest.” Resource-rich countries don’t need to levy taxes, so there is little pressure for government accountability, and hence fewer checks and balances.
Countries don’t get to choose their resource endowment, of course; nor do they get to choose their location. Trap No. 3 is that landlocked countries are economically handicapped, because they are dependent on their neighbors’ transportation systems if they want to trade. Yet this is a minor handicap compared with Trap No. 4: bad governance. Collier has no time for those who still seek to blame Africa’s problems on European imperialists. As he puts it bluntly: “President Robert Mugabe must take responsibility for the economic collapse in Zimbabwe since 1998, culminating in inflation of over 1,000 percent a year.”
If these four things are the main causes of extreme poverty in Africa and elsewhere, what can the rich countries do? Clearly we can’t relocate Chad or rid Nigeria of its oil fields. Nor, Collier argues, can we rely on our standard remedies of aid or trade, without significant modifications. As a general rule, aid tends to retard the growth of the labor-intensive export industries that are a poor country’s most effective engine of growth. And much aid gets diverted into military spending. As for emergency relief, all too often it arrives in the wrong quantity at the wrong time, flooding into postconflict zones when no adequate channels exist to allocate it.
Trade, too, is not a sufficient answer. The problem is that Asia has eaten Africa’s lunch when it comes to exploiting low wage costs. Once manufacturing activity started to relocate to Asia, African economies simply got left behind. Now, to stand any chance of survival, African manufacturers need some temporary protection from Asian competition. So long as rich countries retain tariffs to shelter their own manufacturers from cut-price Asian imports, they should exempt products from bottom billion countries.
This, however, is not the most heretical of Collier’s prescriptions. Reflecting on the tendency of postconflict countries to lapse back into civil war, he argues trenchantly for occasional foreign interventions in failed states. What postconflict countries need, he says, is 10 years of peace enforced by an external military force. If that means infringing national sovereignty, so be it.
At a time when the idea of humanitarian intervention is selling at a considerable discount, this is a vital insight. (One recent finding by Collier and his associates, not reproduced here, is that until recently, former French colonies in Africa were less likely than other comparably poor countries to experience civil war. That was because the French effectively gave informal security guarantees to postindependence governments.) Collier concedes that his argument is bound to elicit accusations of neocolonialism from the usual suspects (not least Mugabe). Yet the case he makes for more rather than less intervention in chronically misgoverned poor countries is a powerful one. It is easy to forget, amid the ruins of Operation Iraqi Freedom, that effective intervention ended Sierra Leone’s civil war, while nonintervention condemned Rwanda to genocide.
Still, it would be wrong to portray Collier as a proponent of gunboat development. In the end, he pins more hope on the growth of international law than on global policing. Perhaps the best help we can offer the bottom billion, he suggests, comes in the form of laws and charters: laws requiring Western banks to report deposits by kleptocrats, for example, or charters to regulate the exploitation of natural resources, to uphold media freedom and to prevent fiscal fraud. We may not be able to force corrupt governments to sign such conventions. But simply by creating them we give reformers in Africa some extra leverage.
Although it stands on a foundation of painstaking quantitative research, “The Bottom Billion” is an elegant edifice: admirably succinct and pithily written. Few economists today can match Collier when it comes to one-liners. “A flagrant grievance is to a rebel movement what an image is to a business.” Calling the present trade negotiations a “development round” is like calling “tomorrow’s trading on eBay a ‘development round.’ ” And “If Iraq is allowed to become another Somalia, with the cry ‘Never intervene,’ the consequences will be as bad as Rwanda.”
If Sachs seems too saintly and Easterly too cynical, then Collier is the authentic old Africa hand: he knows the terrain and has a keen ear. They know it’s garbage, one aid official told him when he queried Christian Aid’s research, “but it sells the T-shirts.”
As Collier rightly says, it is time to dispense with the false dichotomies that bedevil the current debate on Africa: “ ‘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.’ ” If you’ve ever found yourself on one side or the other of those arguments — and who hasn’t? — then you simply must read this book.
Niall Ferguson is the Laurence A. Tisch professor of history at Harvard University and the author of “Empire: The Rise and Fall of the British World Order and the Lessons for Global Power.”
The bottom billion bite back
Much of the Third World is prospering, but a hard core poses an ever growing risk for the rest of usPaul Collier
The Third World has shrunk. It used to mean the poorest people on the planet, the five billion or so living in “developing” countries, looking enviously at we rich westerners. The “millennium development goals” established by the United Nations reflect that thinking: they track the progress of the five billion, but the reality is that most of these people are living in countries where globalisation is working and many are developing at amazing speed. China and India are catching up with the rest of us at an unprecedented rate.
Of course it’s not a seamless process. Many people in these societies are still appallingly poor, but they can see what is happening and have hope. But for a worrying group of countries at the bottom of the world economy, globalisation is not working. They amount to about 1 billion people, and they are not developing but falling behind, and often falling apart.
The bottom billion – who live on less than a dollar a day – coexist with the 21st century, but their reality is the 14th century: civil war, plague, ignorance. They are concentrated in Africa and central Asia with a scattering elsewhere. They live in Chad, Haiti, Bolivia, Cambodia and North Korea.
Even during the 1990s, the supposedly golden decade between the end of the Soviet Union and the attack on the World Trade Center, incomes in these countries were falling, the difference between their living standards and those of the developing world – the part that was actually developing rather than stagnating – growing at about 5% a year.
In a world that is ever more socially integrated through information, business and migration, having a billion people at the bottom falling away economically is going to be unmanageable and frightening.
The 21st century world of material comfort, global travel and economic interdependence will become increasingly vulnerable to these large islands of chaos, which may become havens for terrorism or destabilising civil war. Bean-counting poverty simply misses the point. Even if poverty declines in these societies the conditions for social explosion will mount unless the current situation is reversed. That is the coming challenge of development: rescuing – or containing – a group of countries that for 40 years have been shearing off from the rest of us and must start to catch up.
About 70% of the bottom billion live in Africa. Quite rightly, Africa is repeatedly on the agenda at G8 meetings. But the same process that has forced Africa onto the agenda, namely pressure from celebrities and nongovernmental organisations, has inadvertently trivialised the solution, reducing it to a question of aid. The apotheosis of this process is surely the latest issue of Vanity Fair: devoted to Africa and edited by Bono.
If that’s what it takes to get the bottom billion onto the political agenda then so be it, but unfortunately the problems are not going to be resolved by money alone. More aid would be helpful, but its effect would be minor relative to the other policies the rich world needs to adopt in order to reverse the decline. We will need to go beyond aid if we are really to make a difference.
Our politicians have used Africa to parade how much they “care”. But it’s not enough to care – we have to think. In the 1930s politicians cared about mass unemployment, but the problem wasn’t fixed until they worked out what to do about it.
Europe was rebuilt after the second world war by a package of ap-proaches. Yes, there was aid in the form of the Marshall Plan. But more important were massive changes in other policies. Trade policy was switched from protectionism to integration through the creation of the General Agreement on Tariffs and Trade. Security policy was switched from isolationism to mutual defence through the creation of Nato.
Government ceased to be dictated by paranoid national sovereignty and became subject to mutual standards through the foundation of the Organisation for Economic Cooperation and Development (OECD) and the European Economic Community. Reversing the direction of the bottom billion is a more daunting task than rebuilding Europe. It can be done but it will take the same seriousness.
Getting serious means getting more sophisticated. The policy changes we need just won’t fit on a wrist band. I’ll sketch one example: trade policy. Africa needs to break into manufactured exports, the route taken by Asia. Unfortunately, Asia’s very success makes it far harder for Africa to get started.
Asia already has an established export manufacturing industry that can operate at low cost. Africa cannot compete. Bangladesh has generated nearly 3m jobs by exporting garments: if Ghana or Kenya could do the same it would be transformative, but to get started they need temporary privileged access to our markets.
At present most OECD countries impose tariffs on imports of garments from Africa. There is one exception: America. Thanks to the Africa Growth and Opportunity Act, America allows countries such as Ghana and Kenya to export shirts duty-free into the US. Europe doesn’t, nor does Japan.
Even the few African countries that are allowed duty-free access to Europe get blocked by absurd technical requirements: Lesotho sells thousands of shirts to America, but although in principle Europe allows shirts from Lesotho duty-free, they don’t satisfy the tough “rules of origin” we set.
Over the past five years Africa’s garment exports to Europe have declined while increasing sevenfold to the US. We could easily adopt a common set of rules for these African exports that would generate jobs across the region.
At the very least it’s surely embarrassing that America has got African trade policy right and we’ve got it wrong: after all, we’re supposed to be the ones who care about Africa.
Changing trade policy is just one example of what can be done once we get serious. The Department for International Development should be guiding these changes. It has to become not just an aid agency but the part of government where all policies pertinent for development are coordinated.
The challenge of transforming the future for the bottom billion may be daunting, but it can be done: what is needed is a change of attitude from western electorates, both left and right.
The left needs to move on from the West’s self-flagellation and idealised notions of developing countries. Poverty is not romantic. The countries of the bottom billion are not there to pioneer experiments in socialism; they need to be helped along the already trodden path of building market economies. International financial institutions are not part of a conspiracy against poor countries; they represent beleaguered efforts to help. The left has to learn to love growth. Aid cannot just be targeted for the photogenic social priorities; it must help countries break into export markets.
The clarion call for the left is Jeffrey Sachs’s book The End of Poverty. Much as I agree with Sachs’s passionate call to action, I think 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 scroung-ers and crooks. It has to disabuse itself of the belief that growth is something that is always there for the taking, if only societies would get themselves together.
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 recognise that private activity in the global market can sometimes generate problems for the poorest countries that need public solutions. And because not even the US government is big enough to fix these problems by itself, these public solutions will usually have to be cooperative.
The clarion call for the right is economist William Easterly’s book The White Man’s Burden. Easterly rightly mocks the delusions of the aid lobby. But just as Sachs exaggerates the pay-off to aid, Easterly exaggerates the downside.
So how does this involve ordinary people in rich societies? I have three propositions, each fairly novel, that encapsulate how thinking needs to change.
The first is that the development problem we now face is not that of the past 40 years: it is not the 5 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 at the bottom. This is the problem we are going have to tackle, and if we stick with present policy, 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 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 armoury: trade policies, security strategies, changes in our laws, and new international charters.
I have a six-year-old son: whether we take the trouble to get serious about reversing divergence will shape the world that he and his generation inherit.
Paul Collier is director of the Centre for the Study of African Economies at Oxford. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, is published Oxford University Press
How the bottom billion are trapped
By Martin Wolf
Published: May 13 2007 18:45 | Last updated: May 15 2007 17:32
The Bottom Billion
by Paul Collier
Oxford University Press £16.99, $28
Paul Collier, the director of the Centre for the Study of African Economies at Oxford university, has devoted three decades to the study of African economics. In this splendid book he has used that work to answer the most important question in development: why are so many countries now failing?
About 80 per cent of the population of developing countries lives in countries whose populations are becoming better off. Billions live in countries that are developing very swiftly. But almost a billion people – 70 per cent of whom live in sub-Saharan Africa – are in economically stagnant or declining countries. In all, 58 countries are in this desperate condition. Yet, as Collier remarks: “An impoverished ghetto of 1bn people will be increasingly impossible for a comfortable world to tolerate.”
Collier argues that these countries have fallen into one, or more, of four traps from which it is virtually impossible to escape. These are the “conflict trap”, the “natural resources trap”, the trap of being “landlocked with bad neighbours” and the trap of “bad governance in a small country”.
Seventy-three per cent of people in the bottom billion have been through civil war, 29 per cent are in countries dominated by the malign politics of natural resources, 30 per cent are in landlocked, resource-poor countries with bad neighbours and 76 per cent are in countries that have suffered long periods of bad governance and poor economic policies. Many have fallen into more than one of these traps.
What is to be done? Collier argues that trade, for all its potential benefits, will not help the bottom billion. These countries are uncompetitive exporters of labour-intensive goods and services, given the low costs and established positions of Asian producers. They cannot compete with China or Vietnam. Similarly private capital does not flow to these countries, except to exploit their natural resources. The problem is the reverse: huge capital flight. Collier estimates that almost 40 per cent of Africa’s private wealth was held abroad in 1990.
Collier is also sceptical of the ability of aid to make much of a difference, at least on its own. He believes aid can help – and has helped – the bottom billion. But it has been a holding operation, rather than the start of sustained growth. He is particularly sceptical of the view that unconditional budget support will work. We have, after all, already had an experiment with the consequences of unconditional finance: oil revenues. Debt relief – the darling of the aid lobbies – is the closest thing to oil revenues that the aid industry can provide, a point its proponents ignore.
Aid will not get countries out of the traps. It cannot stop conflict, though it can help after one is over. It can do nothing about the natural resources trap: indeed, it is similar to possessing just another natural resource. It may help landlocked countries with improved transport infrastructure, but cannot eliminate the catastrophe of having bad neighbours.
So what else is needed to help countries in the bottom billion? Collier makes three suggestions: first, military intervention; second, laws, statutes and charters for improved governance; and, third, trade preferences.
The case for military intervention is most obvious, if controversial. Civil wars are so costly that well-timed military actions are quite likely (though not certain) to be cost-effective.
The second area demands changes in high-income countries: ceasing to take money looted from the poorest countries is one such change; elimination of bribery by their companies is another. It also needs charters of better governance for countries in the bottom billion: transparent management of natural resources is among the most important, the UK’s extractive industries transparency initiative being a good start. The book also suggests charters for democracy, budget transparency, post-conflict situations and investment.
This idea sounds very naive. But the European Union has shown that external standards can make a big difference. Why should countries not sign up to charters of better governance in return for large quantities of aid? This is not imperialism. It is a bargain made in the interests of their own people.
The third suggestion is unrestricted access to the markets of high-income countries for labour-intensive exports from the bottom billion. Only thus, suggests Collier, are the resource-poor countries ever likely to break into world markets for manufactures.
The book is rich in both analysis and recommendations. I particularly enjoyed the attack on the misguided economics of many non-governmental organisations. Collier sheds much light on how the world should tackle its biggest moral challenge. It shows, too, how far western governments and other external actors are from currently giving the sort of help these countries desperately need.
Read this book. You will learn much you do not know. It will also change the way you look at the tragedy of persistent poverty in a world of plenty.
The writer is an FT columnist
Copyright The Financial Times Limited 2007
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