"Human well-being cannot be measured solely by wealth"
Paraphrasing the brilliant Amartya Sen in his behind-the-scenes comments on PBS's "Good Fortune" documentary:
On "Development" Development is quite simple; it aims to remove the deprivations that plague human life; we need to look at the freedoms that people have in control over their lives to do the things that they wish to do; it is this extension of human freedom that is the central issue of development.
On "The Solution" We can do an enormous amount to make the lives of each other better; we live in a very interdependent world, and some of us are more fortunate to have more control over our lives compared with others that don't; we have to emphasize the development of human capabilities; not that you bestow development on people, but that you actually make people more enabled. Once one acquires knowledge on how to deal with a deprivation, then they are in a position to help others. This is a unique approach. The way to get things right is to put them under public scrutiny. I am a great believer in public reasoning; this is the most important freedom that human beings have in terms of consequences. Support, sympathy, and communication and more cooperative action are essential to making eachother's lives better.
I was fortunate enough to catch a fantastic, thought provoking documentary courtesy of PBS and POV, entitled, "Good Fortune," which traces two examples of "development" in Kenya through the eyes of both the "developers" and the "developees." The film brought to light many of the moral and political issues involved with poverty alleviation; seldom are there black and white, cut and dry issues when dealing with the human condition and human variables; this film shed some brilliant light onto some of these human predicaments.
David Reiff: To paraphrase his statements: On balance, aid has done more harm than good…The problem, I think, is that the whole discussion of aid avoids the problem of politics. People are not saved from outside-people rescue themselves. They can be helped at the margins. If aid was less ambitious, I would support it, such as emergency relief. If it does as its meant to do, to offer a bed for a night, but not to hope to transform society, then the value of aid is indisputable. What is not indisputable is the idea that foreign institutions and governments know how to fox other people’s difficulties. The problem with aid is that it sets itself as the be-all and end-all. “The man with the gold makes the rules”…What you have, by definition, is outsiders telling people how to behave satisfactorily, then the aid will be withdrawn. By depriving people of their agents, aid does more harm than good. Moreover, the emphasis on aid is misdirected. We should be talking more about fair trade than about aid. What is impossible is the notion of aid as the centerpiece of development.
Gayle Smith: Aid is a very complex instrument that cannot be categorized together. There have been many successes, especially in health and education. Wireless access in Africa has had a huge impact on the local markets-this has come in part from aid. Microfinance has changed many lives, and a lot has come from aid. There is no question that politics has affected aid and has often been driven by politics. Aid needs to be elevated so it is on par with other institutions and protected from politics, ring-fenced against use for reasons other than development. At the end of the day, development matters. Development is a moral, economic, and security interest. What is the alternative? The military as our primary means to contributing to development?
William Easterly: There are two tragedies in this debate. The first is the unnecessary suffering in Africa-lives can be saved by a 12 cent dose of malaria medicine which is not being done. The second tragedy that we hear a lot less about is that we have already spent 600$ billion in the last 45 years, and children are still not getting those 12cent medicines. Aid would be great if it worked, but the sad tragedy is that money meant for the most desperate people in the world is not reaching them. Over the 45 years of aid, there has basically been a zero rise in living standards in Africa. Every generation calls for an increase in aid to solve the issues of their generation. Everybody calls for the doubling of aid to Africa, but what good does it do to focus on amounts when most of the money is not being used correctly. Most of it goes to corrupt and autocratic rulers. 2/3 of aid today still goes to corrupt rulers (see: Meles in Ethiopia). A lot of aid went into countries that have collapsed into anarchy, such as Rwanda, Congo, Somalia. Thus, aid worsens corruption, blocks democracy, and is an obstacle to getting rid of corrupt rulers. We must condemn the sorry record of aid as simply unacceptable, as making things worse rather than better.
John McArthur: If we think about what aid achieves and doesn’t achieve, we must caution against random correlations. When we look at statistical evidence, Africa grows on average 2% slower than other developing countries in the world, even with lower standards of governance and higher levels of corruption. Why do Ghana and Senegal, with higher Transparency International ratings, grow slower than China and India? This is because of disease, infrastructure, and lack of education that is a legacy of history. It is about much more than bad governance. Aid is about tackling the challenges of health, education, and infrastructure effectively. There has been successes. The eradication of smallpox by the UN. The fight against AIDS has brought retroviral medications to more than a million people which was considered impossible. Primary school enrollment rates are up 20%. Measles has been cut 90% in Africa. This has all been backed by aid. In Malawi aid has supported the national plan to get seed and fertilizer to farmers and the country has doubled its food production. Aid needs to build on success.
George Ayittey: The record of aid has been a disaster. If you want to better help the African people, you need to ask them what they want. Africans are interested in reform, not aid. Economic reform, political reform, and social reform. Corruption costs the continent over 140$billion per year.
I have been reading into the MIT Poverty Action Lab's work since seeing their test results published in the book Economic Gangsters. In looking specifically at their randomized trials in the educational setting, I was drawn to recent work done in Madagascar, which looked at the effects of both a "top down" and a "bottom up" approach to school interventions. Madagascar is filled with the same issues as most of the developing world in terms of lack of truly progressive educational policy and a stagnant public education system riddled with huge systemic problems. The details are as followed for the "intervention:"
Researchers, in collaboration with The Ministry of Education in Madagascar, ran a randomized experiment in 3,774 primary schools in 30 public school districts. These districts represented all geographic areas in the country, but were focused on schools with the higher rates of grade repetition.
All district administrators in treatment districts received operational tools and training that included forms for supervision visits to schools, and procurement sheets for school supplies and grants (district-level intervention). In some of these schools, the subdistrict head was also trained and provided with tools to supervise school visits, as well as information on the performance and resource level at each school (subdistrict-level intervention).
Lastly, several districts also introduced a school level intervention which involved parental monitoring through school meetings. Field workers distributed a ‘report card’ to schools, which included the previous year’s dropout rate, exam pass rate, and repetition rate. Two community meetings were then held, and the first meeting resulted in an action plan based on the report card. One example of the goals specified in the action plans was to increase the school exam pass rate by 5 percentage points by the end of the academic year. Common tasks specified for teachers included lesson planning and student evaluation every few weeks. The parent’s association was expected to monitor the student evaluation reports which the teachers were supposed to communicate to them. These tools allowed parents to coordinate on taking actions to monitor service quality and exercise social pressure on the teachers.
What is so interesting about the results is that the top-down approach, which is the traditional development approach of dealing with school reform, did practically nothing to actually improve the conditions on the ground. What showed large results were the "bottom up" trials, in which parental monitoring, field workers, and community meetings following specific action plans. Here are the details from the MIT site:
Impact from Bottom-Up Approach: The interventions at the school level led to significantly improved teacher behavior. Teachers were on average 0.26 standard deviations more likely to create daily and weekly lesson plans and to have discussed them with their director. Test scores were 0.1 standard deviations higher than those in the comparison group two years after the implementation of the program. Additionally, student attendance increased by 4.3 percentage points compared to the comparison group average of 87%, though teacher attendance and communication with parents did not improve.
This is a great talk by Sheeran on the realities of hunger in the developing world.
Every day, 1/7th of humanity, about a billion people, wakes up hungry and does not know
how they are going to get their daily meal. This figure (though im sure disputable) is simply staggering.
Every ten second, a child is lost to hunger. There is enough food on the earth to provide nutrition
to every man, woman, and child. The problem is greed. Hoarding. Distribution. Commodity speculation. "80% of the people in the world have no food safety net."
Introducing food into schools is an extremely effective way of both combating hunger and increasing school enrollment, especially amongst girls, as well as supporting local farmers if the food is locally mandated.
"To a hungry man, a piece of bread is the face of god."
-Gandhi
"Famines happen in the presence of food people have no ability to buy it."
-Amartya Sen
Easterly opens at google addressing the following massive tragedy: 30,000 children die every day from extreme poverty. They die because they are simply too poor to stay alive. This is preventable death, such as diarrhea, which can be prevented by re-hydration packets costing pennies. The other tragedy, according to Easterly, is that the West has already given $2.5 trillion over the last decades, and these deaths are still happening. This is the problem. This is the scandal. That so much money and effort has been spent on this problem, but there is so little evidence of the effectiveness. (This is a scandal. But a lot of the money needs to be seen for what it really has been; simple economic stimulus for western companies, doled out by national agencies, with little regard for outcome; as this money dwarfs other aid money, as it is coming from national sources, it can be seen as the bulk of the issue; but categorizing all aid, all development money as a failure is a gross oversimplification and simply not true).
Too much attention is focused on what is spent, and this creates incentives for spending more money, not for creating effectiveness and results, for actually reaching the poor. This is the second tragedy, according to Easterly. (certainly a problem, but there HAS been results. In many places that have been stagnant, without the input of aid, their growth rate would be, in fact, negative, as per Collier/Oxford Analysis).
According to Easterly, “Nobody is individually responsible for any individual result.” There is, thus, collective responsibility, which leads to unaccountability on the behalf of the aid and donor agencies. The aid plans, thus, give the appearance of action, using publicity, which substitutes for real action, as the money is not actually reaching the people intended, which is another tragedy. There is a lack of customer feedback (the recipients), there are a lack of incentives and accountability for results, and thus, there are a lack of good outcomes as a result. (this is being overly simplistic, though good points are made on the need for more accountability; however, the realities of the international geopolitical platforms in which the world conducts its business needs to be looked at in all fairness; while fraught with problems, the UN has still given the world a net benefit over the years, for instance).
The private market, according to Easterly, would be a good model for what needs to be done in this aspect. Introducing accountability, feedback, incentives for efficiencies. If customers are dissatisfied, they can take their business elsewhere. (However good a point, he fails to note that this is not the case in the developing world with services/government accountability, especially looking at the test case of resource-renting nations).
The markets should be a metaphor for how aid should work, according to Easterly. Donors should be thinking in this mindset to achieve good outcomes.
The poor are stuck with official aid which is caught in complex, top-down planning, which is non-accountable.
Why has this happened? Why have planners taken over foreign aid? If politicians are not to be held accountable for their promises, they might as well make the biggest promises possible. And there is no quick, easy answer to the end of poverty. (agreed).
The countries with the highest aid have had the lowest growth, and the countries with the lowest aid have had the highest growth, according to Easterly. There is no evidence that aid creates growth, according to Easterly's empirical data. (Easterly's data needs to be looked at with external “traps” factored in, such as conflict affecting growth, bad geography, coups, etc, to be seen in all fairness).
Recent UN Reports show that in many countries the Millennium Development Goals are not being met, that they have been a failure. Easterly again points to the need for accountability in the agenda as the answer to a lot of these questions, as a non-traditional answer to the problems. (The question is how to increase the feedback mechanisms with aid, in terms of the target audiences who have had no experience with accountability in their lives, ie: governments, institutions, etc. To many, even the non-effectiveness of the agencies is still much more effective than their own governmental institutions. And again, without the effect of aid, which has been fraught with failure, the realities in many areas would be much worse).
“There is no room for the sort of home grown effort that would get started on its own and attract financing (in Africa).” Easterly proposes a “searcher” model, in which the aid agencies search for people and organizations doing good things on the ground and supporting them. (This is a great idea! Ideally, this would be a fixed percentage of all agencies budgets).
Easterly's Policy Recommendations:
When something doesn't work, discontinue it.
Discontinue structural adjustment loans to poor countries
Get rid of utopian goals and plans (MDG's, etc)
For long-run development, most hope is not from aid, but from homegrown development, social entrepreneurs, and private investors
All good points. However, I will have to personally disagree with #3 and #4. I believe that large plans do have a place in the development of nations; and there has been success in meeting these goals, despite Easterly's critiques. There is simply a lot more to the data than he presents, aka: the “known unknowns” that occur in the least developed countries in the world, normally as a result of poverty, aka, the “traps” as presented by Collier. Only in lifting a country from these traps through massive pushes, which will be a combination of homegrown development, social entrepreneurs, and outside organizations, in addition to other massive country-led initiatives (such as, but not limited to the infrastructure-for-commodities deals arranged with China and India, which, despite serious issues, are a reality that cannot be debated at this point in time). An integrated approach will look at lot like a “massive push” such as the MDG's. And catchy slogans draw attention. And attention is a damn good start. I note that Easterly spends a lot of time slamming Bono and Angelia Jolie for their Sachs relations and globe trotting; while far from being policy experts, the ability to draw attention to an issue, the ability to bring a focus onto an issue from people who otherwise would simply not care, is something that cannot be discounted. Thus, I believe there is a roll for the “concerned actor” and many have done tremendous work in bringing issues to light. While teaching in the Bronx, I showed Hotel Rwanda and Save Darfur as part of a Human Rights curriculum I was teaching, and the impact of Clooney, Cheadle, and others on focusing the attentions of inner-city high school youths was immense. There is a place for this attention, and Easterly would do better by not simply dismissing it as a cheap publicity ploy. In terms of the need for homegrown development, I fully agree with Easterly. However, for this development to flourish, much macroeconomic change needs to occur in many of the poorest nations. In these nations, there is simply not room, due to terrible government policy, for social entrepreneurs to flourish; thus, the macro needs to be shifted through englightened governmental policies (trade, business, mineral extraction) before these “homegrown” initiatives can truly transform. And the macro will simply not change in a vacuum; there needs to be outside influence in many nations where the leaders are simply not looking out for the best interests of their citizens. Thus, both approaches are necessary; aid needs to be much more effective, this is a given; however, this is not a black or white issue; many of Easterly's proposals can only come with external funding (ie: homegrown development attractiing foreign investment and turning into viable social businesses) and a change in the domestic business environment. Capitalism cannot cure all; the platforms for capitalism need to be laid down before it can do so; in the meantime, as Paul Collier notes, much of the roll of aid will be to simply provide a basic decency in the lives of many.
The economic miracles of the East have come in the absence of foreign aid; in fact, China was a donor nations to its many Maoist friends during the worst of its economic debacles of the last decades; however, the reality on the ground is the reality-the Asian tigers have already seized the manufacturing and service based growth that is needed by African nations to grow themselves out of poverty, and there is very little chance of manufacturing becoming agglomerated in many of the countries of the bottom billion in the coming decades, and thus, the problems will persist, unless assistance is given, in the forms of aid, trade barrier resolution, and infrastructure development. A country such as Chad will simply not be able to compete its way out of poverty with a nation such as Vietnam or even Bangladesh. What, then, to do about the Chads of the world? Abandon them? Aid needs to be focused, targeted, and made more accountable for the truly needy of the world, of which there are many. It does not deserve to be abandoned, despite all its failings
“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 should compensate by increasing their project supervision, which means higher administrative overheads. They should become swift-footed, seizing reform opportunities at an early stage. They should intervene strategically, financing big-push strategies for export diversification. They should introduce governance conditionality. At present, the powerful force of popular opinion is driving agencies in precisely the opposite direction. They cannot afford failure. They have to be lean with low administrative expenses. They have to prioritize long-term social objectives rather than short-term opportunities for reform and growth. They have to give unconditional debt relief.”
On the role of 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. The critical changes in trade policy-temporary protection of the bottom billion from Asia in our markets-are politically difficult not because they threaten any interests, but because they do not fit into any of the current slogans and so don't make it onto the agenda.
A Novel Approach to Corruption in the Public Sector-The Bottom Billion-Laws and Charters
On the utilization of the press in combatting corruption in the public sector, obviously reliant on a free local press and an open environment free of politically-based intimidation, obviously not the case in many of the bottom billion societies. But nonetheless, certainly noteworthy.
“...only around 20% of the money that the Ministry of Finance released for primary schools, other than for teacher's salaries, actually reached the schools. In some societies the government would have tried to suppress information like this, but in Uganda, far from suppressing it, Tumusiime-Mutebile used it as a springboard for action. Obviously, one way would have been to tighten the top-down system of audit and scrutiny, but they have already been trying that and it evidently wasn't working too well. So Tumusiime-Mutebile decided to try a completely different approach: scrutiny from the bottom up. Each time the Ministry of Finance released money it informed the local media, and it also sent a poster to each school setting out what it should be getting...Now, instead of only 20% getting through to the schools, 90% was getting through....the media had been decisive-in this case reports in the newspaper. So scrutiny turned 20 percent into 90 percent-more effective than doubling aid and doubling it again.”
Collier suggests a solution to the problem of bad governance; the creation of so called “Independent Service Authorities.” “The idea is that in countries where basic public services such as primary education and health clinics are utterly failing, the government, civil society, and donors combined could try to build an alternative system for spending public money...The authority would be a wholesale organization for purchasing basic services, buy some from local governments, some from NGO's such as churches, and some from private firms. It would finance not just the building of schools but also their day-to-day operation., Once such an organization was put into place, managed jointly by governments, donors, and civil society, both donors and the government would channel money through it.” This is an extremely debatable idea, though from first inspection, a novel and wise one; I have visited the government health and education ministry buildings in some of the bottom billion societies, and the sights were terrifying, to say the least, not even to speak of efficiencies. In some of the worst nations in the world in terms of governance, this would be the only viable option-the civil services are so thoroughly disintegrated, that starting over is the only way of actually progressing, however, heartbreaking a thought this might be (simply sidestepping 50 years of post-independence “progress”).
And creating buy-in by the actual nations would be extremely difficult; the interests are intrenched, and bypassing these interests would require large political capital and guts by the top leadership. Collier compares his idea with that of one already implemented in many nations, that of the “Independent Revenue Authorities” which have been created in the last decades. “The function was taken out of the traditional civil service for precisely the reason that I want basic public services to be taken out of the traditional civil service-there was no realistic prospect of the traditional system being made to work. Why did governments go for the radical option on revenue but not on service delivery? The answer is depressingly obvious: governments benefit from revenue, whereas ordinary people benefit from basic services. Governments were not prepared to let the traditional civil service continue to sabotage tax revenues, because governments themselves were the victims. They were prepared to leave basic service delivery unreformed because the governing elite ot its services elsewhere.”
In terms of the different areas of poverty traps, (including the Conflict Trap, the Natural Resources Trap, Landlocked Trap, and the Bad Governance Trap), Collier notes that the one that is most promising for change, in relation to the input of foreign aid, is the last, governance (and policies). In terms of the relation between the actual donor agencies and the governments on the receiving end, Collier notes, “...aid agencies have very little incentive to enforce conditions: people get promoted by disbursing money, not by withholding it.” While this has been since adapted and changed to reflect more of the realities on the ground, the problem still persists. Changes in governance must not be simply promised in return for offers of aid; the changes must take place, must take root, and must be well-configured before the aid is distributed. This is the only practical way of dealing with this issue of distribution and conditionality. Collier further notes, “The key objective of governance conditionality is not to shift power from governments to donors, but from governments to their own citizens...why should we give aid to governments that are not willing to let their citizens see how they spend it?” Thus, aid levels should be directly tied to good governance, transparency, and positive changes on the ground for the citizens of these nations. However, a big hurdle in these reforms of governance comes with the lower and middle levels of the government itself, the civil service, which in many nations of the bottom billion, has been hollowed out and stocked with incompetence and corruption as a guiding principal. How, thus, to change the entire culture of a civil service, from the “serve thy self” motivation to actual performance-based efficiency, with little extrinsic motivation present to reward positive change? Can aid bridge this gap? If not, what can? I believe this is one of the biggest hurdles facing the developing world. An entire culture can only be changed from the top-down; getting the right talent in place at the top is extremely difficult in itself in an age of kleptocrats and octogenarian rulers; but even once this change has been made, extending their writ down to the lowest levels takes a huge paradigm shift in the entire culture of the nation, and as a microcosm of the nation, the civil service. In fact, Collier has looked into the effect of bringing in technical assistance, ie: foreign experts, and their effect on a country's turnaround; his research has shown that foreign experts are only going to help with situations in which there is a new leader, which is very specific in the nations of the bottom billion. “Technical assistance during the first four years of an incipient reform, and especially during the first two years, has a big favorable effect on the chances that the momentum of the reforms will be maintained. It also substantially reduces the chance that the reforms will collapse altogether.” These are all the smaller pieces of a vast pie: each needs to be considered and enacted in its own right to sustain a longer-lasting growth and development in these nations. The biggest problem with the current deployment of technical assistance to nations is that, “...technical assistance is supply-driven rather than demand-driven. The same assistance is poured into the same places year after year without much regard to political opportunities.” And thus, the agencies MUST understand that their work is fluid; that the human situations and the human capital that they are dealing with are fluid, changing, and prone to opportunity and downturn. They MUST be responsive to these changes to take advantage of the particular opportunities that present themselves, to make the most of a finite resource.
Collier later critiques the motivations and the change-capacity of the agencies in "Aid to the Rescue?": Agencies operate with two-types of fair-shares rules. One is for countries: it is difficult to privilege one country over another, even temporarily, although if the Krugman-Venables thesis of agglomeration economies is right, then one of its implications is that such temporary concentrations of aid are likely to be efficient...So the present aid system is designed for incrementalism-a bit more budget here, a bit more budget there-and not for structural change. Yet we know that incrementalism is doomed because of diminishing returns to aid. Just doing more of the same is likely to yield a pretty modest payoff. For aid to promote structural change in countries requires structural change in aid agencies."
Collier continues with the next aspect of aid coming under his statistical eye, that of money supplied for project or budget support. He notes, “Money early in reform is actually counterproductive. It makes it less likely that the reform will maintain momentum.” Thus, in the early stages of a post-conflict turnaround, the most effect assistance that can be given is in the form of technical assistance. A few years down the line, however, the tides turn, and budgetary and project support becomes much more viable. In summing this “sequence,” Collier notes, “Aid is not very effective in inducing a turnaround in a failing state; you have to wait for political opportunity. When it arises, pour in the technical assistance as quickly as possible to help implement reform. Then, after a few years, start pouring in money for the government to spend. Aid used in this way to support incipient turnarounds would be pretty high-risk. Even with aid many incipient turnarounds would fail. The payoff is high because the successes, when they happen, are enormously valuable.” And thus, a “turnaround fund” would be seen as the most likely source of funding for these transitions to occur, which the British government has already funded in the last number of years. (It would be interesting to contrast this statistical analysis with analysis of the opposite, or such a situation as what is currently going on in Malawi, where a negative shift in governance has caused a large pull out/suspension in donor funding and budgetary support.)
“Aid does tend to speed up the growth process. A reasonable estimate is that over the last thirty years it has added around one percentage point to the annual growth rate of the bottom billion. This does not sound like a whole lot, but then the growth rate of the bottom billion over this period has been much less than 1 percent per year-in fact, it has been zero. So adding 1 percent has made the difference between stagnation and severe cumulative decline. Without aid, cumulatively the countries of the bottom billion would have become much poorer than they are today. Aid has been a holding operation preventing things from falling apart.
Strong words in a nominal, yet forceful, defense of aid. From the viewpoint of the Easterly's of the world, quite radical, I believe; the knowledge that while far from perfect, the situation without the cumulative input of aid dollars would be much worse; which is both encouraging for aid, and discouraging the overall situations of the poorest countries in the world. However, Collier then introduces the concept of “diminishing returns” in regard to increasing the amount of aid to further increase the effectiveness of this growth boost in the developing world. According to Collier, “A recent study by the Center For Global Development, a Washington think tank, came up with an estimate of diminishing returns implying that when aid reaches 16percent of GDP it more or less ceases to be effective.” Thus, this needs to be seen as a strong guideline in the deployment of resources; the ability of a government to intake vast sums of foreign aid is limited in many ways; the absorption of these funds is often near impossible by many small aid garnering nations. In looking at the effectiveness of aid vs. budget support (aka: providing countries with money to use at their discretion in distribution), Collier notes that aid has been much more effective and value-adding, due to the aid agencies themselves. While far from perfect in their bureaucracies and regulations, the agencies do enhance the effectiveness of the financial transfer (102). “Given the bad public image of aid agencies...this is hard to believe, but there it is. The projects, procedures, conditions, and suchlike have been beneficial overall, enhancing the value of the money transferred compared with just sending a check and hoping for the best...Aid has tended to be more effective where governance and policies are already reasonable...(this) is actually pretty controversial...people quite reasonably do not like the harsh-sounding implication that the countries with the worst problems should get the least money” (102). Collier continues, “...the biggest deviation was that far too much aid was going to middle-income countries rather than to the bottom billion. The middle-income countries get aid because they are of much more commercials and political interest than the tiny markets and powerlessness of the bottom billion.”
And thus, the revolutionary statement emerges: Aid should be reserved for the most needy. It should not be used as a carrot in a geopolitical stage set. And yet, of course, when the history of aid is studied, this is exactly what the vast bulk of aid has been earmarked for over the years. Think of the unwitting countries caught in the crossfire during the Cold War. Countries taken over by ideological battles, aid recipients chosen because of simple political proclamations, not based on the theory that the most needy should get first. Is it even a possibility that aid could exist in a non-politicized manner, where the welfare of the poor is the sole determining factor in disbursement?
Collier advocates that the answer is private capital investment; private capital investment in Asia has been huge, and has resulted in huge productivity gains for its populace; however, the level of private capital investment in the countries of the bottom billion has been extremely fickle. Thus, another huge challenge; how can we prod private investment in sustainable industry in a place where the lack of transparent governance and rule of law makes this very investment so unlikely? How can we connect these two side of an unanswerable equation?
“Historically, part of the answer (to the lack of investment) has been poor governance and policy. Obviously, this does not impede capital inflows for resource extraction-hence Angola-but it has curtailed the footloose investment in manufacturing, services, and agribusiness...the problem is that even reforming countries are not attracting significant inflows of private capital...the answer is that the perceived risk of investment in the economies of the bottom billion remains high...the problem for the reforming countries of the bottom billion is that the risk ratings take a long time to reflect turnarounds.” And thus, when we monitor global events and consider the recent upheavals in previously “stable” nations such as Malawi, and a bit longer-span-wise in Coite D'Voire, and recently in the United States and Europe, it is no surprise that the lack of serious, long-term, private investment is a problem that will not vanish anytime soon.
“Let me be clear: we cannot rescue them. 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 are usually defeated by the powerful internal forces stacked against them. We should be helping the heroes...” (96)
“...the sad reality is that although globalization has powered the majority of developing countries towards prosperity, it is now making things harder for these latecomers.” (80)
Indeed, how can the growth models of South and East Asia be replicated in the sphere of the Bottom Billion, and specifically, in the poor, landlocked, resource-rich, and poorly governed countries of Sub-Saharan Africa?
Collier continues, “...manufacturers and services offer much better prospects of equitable and rapid development (than the production of primary commodities). They use labor rather than the land. The opportunity to export raises the demand for labor. Since the defining characteristic of developing countries is that they have a lot of unproductive labor, these exports are likely to spread the benefits of development more widely. And because the world market in manufactures and services is huge and was initially dominated by the rich countries, the scope for expansion by developing countries is massive.”
“Economies of agglomeration.” (Krugman and Venables): if other firms are producing in the same area, it brings down the overall costs of production and manufacturing, as well as providing a solid pool of labor and other inputs necessary for manufacturing and services. This is what occurred in Asia, with the manufacturing shift from the US; at first, firms who wanted to relocate needed to “jump” the gap of a lack of agglomeration in return for the value added by low wages; once one company made this jump and was followed by others, it opened up a huge competitive advantage for Asian manufacturing, as a result of this “Economies of Agglomeration.”
Collier notes on this point that, “...in order to break into global markets for manufacturers it is necessary to get over a threshold of cost-competitiveness. If only a country can get over the threshold, it enjoys virtually infinite possibilities of expansion; if the first firm is profitable, so are its imitators.”
And thus, because of a lack of these agglomerations, Africa “missed the boat” in the manufacturing boom of the 1980's. (84). However, “...each year of being free of the gross failures of governance and policy added significantly to the success of export diversification. The countries that stopped shooting themselves in the foot were able to break into new export market” (85).
And finally, Collier concludes, “If there really has been a process of missing the boat, it is pretty depressing...The most depressing reaction is for people to see the society as intrinsically flawed. Their prolonged period of economic failure in Africa and the other countries of the bottom billion has deeply eroded the self-confidence of their societies. The expectation of continued failure reinforces the pressures for the brightest people to leave...the same automatic process that drove Asian development will impede the development of the bottom billion”(86). Anyone who has transited from the African continent, via air, to Asia, can feel the difference in the air, can immediately sense the heightened activity, the energy, the industriousness that often overwhelms in South Asia and Southeast Asia; everyone seems to be doing something, movement is certain, lethargy the exception; a vast contrast to the realities on the street in much of Sub-Saharan Africa and a critical area for analysis, (though it would be hard to quantify a sense of societal energy). I think the key term that Collier references here is expectation. The expectation that the next generation will be better off, that the country is indeed progressing, is an extremely powerful motivational and economic tool for a populace, the effects seen both in the developed and developing world.
In this chapter, “On Missing the Boat,” Collier goes on to mention the effects of the drive-up in global commodity markets (as a result of the Asian manufacturing boom) on world commodity prices, and thus, commodity-producing nations in the bottom billion. And the results are not encouraging; though much of the recent “African Economic Renaissance” can be attributed to increased commodity exports (particularly to China, which is described well in “The Dragon's Gift” a great book by Deborah Brautigam), this economic boom benefits few, as the governance needed to ensure proper development from natural resources is sorely lacking in places such as The DRC, Chad, and even Mozambique, ala, “The Natural Resource Trap.”
A brief explanation of the resource curse, aka: Dutch Disease that has become a huge challenge for the global south: resource exports, (normally in the form of oil/diamonds or other extractables) cause the country's currency to rise against other global currencies; this, in turn, makes the country's other exports uncompetitive, and thus, cripples the rest of the broader economy of a developing nation. This curse has been seen all over the world, but has been most prominent in the new oil producing states of West Africa, which have seen their standards of living actually contract after decades of enormous oil-based inflows of wealth. The situation also causes the "renter state" mentality, in which a nation's rulers, by the lucky chance of geography, become unaccountable to the people, as they are not depending upon the people for power; they are, in fact, only accountable the the minerals being extracted under the ground for the power and rule. Thus, authoritarianism and corruption become the rule, the norm, ala Chad, E. Guinea, Nigeria, Libya, Saudi Arabia, etc etc.
Collier explains, "Dutch disease can damage the growth process by crowding out export activities that have the potential to grow rapidly. The key activities are labor-intensive manufacturing and services, the sort of exporting now done by China and India." (40). And thus, with the tested means of economic advancement in the modern world, aka: manufacturing and services, which have created the most massive unburdening of poverty in world history in the past decades ruled out (as these nations simply cannot compete with the dynamic economic cohesion, infrastructure, and governmental benevolence of the far east) what do we have left to answer the puzzle of growth? Is it aid? I think not: aid cant actually create the same problems as mineral extraction; ie: they can cause the same artificial imbalance in a country's import/export earnings/currency valuations. Aid becomes a key source of foreign exchange, and for a poor country, especially a nation languishing in the bottom billion, exports lose their value domestically, and the local currency is driven up, making daily life and existence harder and harder for the local populace, which bears the brunt of the macro-economic geopolitical realities.
Some important notes and commentary from the "Civil War and Postconflict" section of Paul Collier's The Bottom Billion:
"Dependence upon primary commodity exports-oil, diamonds, and the like-substantially increases the risk of civil war." (21)
"A typical low-income country faces a risk of civil war of about 14 percent in any five-year period." (20)
"Take the repression of political rights...There is basically no relationship between political repression and the risk of civil war." (23) To which I would love to ask Professor Collier, how has this changed with the Arab Spring, which obviously proved that there is a connection here, ie: Libya, Yemen, and with the greatest example being Syria (and to a lesser extent the events of the failed Iranian uprising of a few years ago and the recent events in Uganda and Malawi).
"The experience of having been through a civil war roughly doubles the chance of another conflict." (27)
"Civil war is development in reverse." (27)
"The risk that a country in the bottom billion falls into civil war in a five year period is nearly one in six, the same risk facing a player of Russian roulette...growth directly helps to reduce risk; cumulatively it raises the level of income, which also reduces risk, and that in turn helps to diversify the country's exports away from primary commodities, which further reduces risk." (32) To which I would add, in order to prevent the stalling of this cycle of development at the raising of the levels of income (ie: stalling at the diversification level of the economy, which is the true state of affairs in most resource-rich countries, ala: Nigeria, Equatorial Guinea, etc), a truly benevolent, people-focused government must be in place (either democratic or not, in my mind and experience, there is no bearing or necessary correlation between open democracy and strong development, ala: the Rwandan/Chinese model of growth), and this government must be willing to invest the necessary inputs into freeing the citizens at the lowest level of society from the bonds of historical repression, ie: illiteracy, malnutrition, etc. Growth is important, obviously, as previously stated, however, key to this growth is a systematic, solidified investment in a populace.
"A country such as The Democratic Republic of Congo will need around half a century of peace at its present rate of growth simply to get back to the income level it had in 1960. Its chances of getting 50 years of continuous peace with its low income, slow growth, dependence upon primary commodities, and history of conflict, are unfortunately, not high. This country is likely to be stuck in a conflict trap no matter how many times it rebrands itself, unless we do something about it." (34). The stark realities, the realism of the challenges facing the very poorest in the world, the most unstable; the realities shared with so many other countries on the ground; and even with massive western intervention, vis-a-vis Afghanistan, the realities are uncertain, at best.
In completing some of the preliminary suggested reading for my coursework at LSE, I have been rereading Paul Collier's most excellent book, "The Bottom Billion. I had read this a few years back and its message stuck with ever since. I will be quoting and providing dialogue/commentary to some of the key points made by Collier, a true expert in the field of developmental economics. (In fact, I am at the library right now and I have just picked up another of his works, "Wars, Guns, and Votes: Democracy in Dangerous Places," which is next on the reading list.
(p11): Collier advocates for an emphasis on the growth rate of countries, to harken back to Kennedy, "A rising tide lifts all boats." While it is obviously hard to disagree with this, I think that a focus on growth alone is fraught with danger. Joseph Steiglitz has agreed in his drive for a measure "other than GDP" to gauge human development, and the cause has been taken up by countries such as Bhutan, which is aiming to expand the breadth of its "Gross National Happiness" measure at the UN. From recent personal experience in East Africa, and the experience of recently reading the Wikileaks pages on Mozambique, GDP growth, even where phenomenal, where not corresponding to the strong rule of law, transparency, and governance, is a shallow indicator of human development. If a country, such as Mozambique, (which has been growing at 6-8% a year for quite some years now), is measured in this light, what is being measured is the rise in living standards of the rich, urbanized elite, whose stranglehold on power and the economy (often in gangster like cartels, such as is seen in Mozambique, despite its "liberalization" and heralding in the west), and not the actual living standards of the populace, which if one ventures to the rural areas of the north of the country, remain as unchanged as they have been for hundreds of years. Try telling a villager on the road from Namialo to Pemba in the north of the country, living on a dirt path, in a mud hut with thatched roofs, no electricity, no plumbing, and possibly only a mobile phone to connect them to the 21st century that their country has experienced one of the highest growth rates in the world going on a decade, and I do believe that would solicit a wide, hearty laugh. Developmental indicators must, thus, focus on the real indicators of progress for the populace, and not simply economic output figures that often mask the realities on the ground. Literacy, infant mortality, caloric intake; these should be the measure of progress for nations in the developing south. There should not be a "discomfort" about growth, it should be an aim for all; nobody wants to regress, nobody wants to stagnate; however, more enlightened thought needs to be focused on this topic.
Collier notes, eloquently, that, "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. Take away that hope and smart people will use their energy not to develop their society but to escape from it" (12).
"GDP does not tell you what is going on with the average citizen. When you have inequality in a society, you can have GDP going up, as it has been in the United States, but most people...are becoming worse off...Developing countries may be growing by cutting down their forests, but once they cut down their forests, there's nothing there. Its not sustainable. GDP tells you nothing about sustainability"
Drawing parallels between the book I am currently reading, (well, re-reading), Paul Collier's wonderful "The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It," and today's news streaming down my computer screen courtesy of the BBC. Collier laments constantly about the "Traps:" those conditions which hold the poorest nations in a cycle of instability and economic malaise; looking at the news today about famine being declared in Somalia, already a failed state, I think of the regional ramifications for this newest humanitarian disaster. Collier states, "Many of the costs are borne by neighboring countries...Since most countries are bordered by several others, the overall cost to neighbors can easily exceed the cost to the country itself." And while it is calloused to think of a newly declared famine in the terms of "costs," the spiraling effects of these regional calamities are hard to understate. Reading further in the news: riots in Malawi, an attempted assasination in Guinea; just when the "bad old days" seemed to be over, the fractures reappear so easily in the poorest nations in the world; the image band-aids are so easily peeled away by the softest of breezes.
Collier on "The Bottom Billion:" The countries at the bottom coexist with the twenty-first century, but their reality is fourteenth century: civil war, plague, ignorance. They are concentrated in Africa and Central Asia, with a scattering elsewhere. Even during the 1990's, in retrospect the golden decade between the end of the Cold War and 9/11, incomes in this group declined by 5 percent. We must learn to turn the familiar numbers upside down: a total of five billion people who are already prosperous, or at least on track to be so, and the one billion who are stuck at the bottom."
