Haiti's Rise From the Rubble

Paul Collier recently wrote an excellent review of Paul Farmer's new book on reconstruction in Haiti, entitled, 'Haiti After the Earthquake' with some salient points about Farmer's approach to reconstruction and redevelopment. Farmer, whose work in health has been truly monumental (and will, most certainly, lead to a Nobel Prize at some point in his career), and has been well documented in Tracy Kidder's beautiful tome, "Mountains Beyond Mountains," does not, it seems, play the role of development expert as well as he does health expert. Farmer's recommendations involve the heavy reliance on a national government that was both unable and unwilling to provide services BEFORE the disaster struck; granted, which local ownership of the reconstruction process is a vital component in the medium-to-long term, the immediacy of the impact of the earthquake and the as-of-yet inadequate governmental response to the calamity demands innovative thinking. Thus, the "Interim Haiti Recovery Commission," described by Collier as, "...a potentially far-reaching innovation, one that could serve as a prototype for for aid in fragile states." The biggest challenge since the disaster has been the coordination of the NGO's that have sprung up in its wake; the dissonance caused by too many organizations working in too small of a space has inhibited progress instead of serving to propel reconstruction. Thus, the Commission: "The commission was set up to break the logjam of dysfunction, tell donors what to fund, tell NGOs what to do, and provide the necessary authorizations on behalf of the government. In the longer term, it will need to evolve into something fully Haitian that can supersede those parts of the state that are essential yet, realistically, beyond reform."
Collier had touched on this point in his book, "The Bottom Billion," with his Independent Service Authorities, set up as extra-governmental bodies to, in essence, get the job done on crucial tasks of governance. Thus, there is something to these external-bodies; and in meeting the largest critique, that of the vested interests enjoying the low-hanging pickings of corruption, milking on fickle, external development and humanitarian funds for personal gain,  inside the status-quo, Collier answers sagely, "...prickly assertions of soverignty are an inadequate response to reasonable concerns."

Collier, Foreign Exchange, and Pseudo-Democracies

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Paul Collier: Pseudo-Democracies and Solutions: Foreign Exchange 522

Why are elections meaningless for the countries of the bottom billion?

Elections depend on being well conducted; they are only well-conducted when there are institutions already in place that force the politicians to stick by their honest roots; if these institutions are not in place, elections are easy to circumvent by corrupted leaders.

If the first wave of democracy is to hold elections, we will never get to institutions that are needed for effective democracy.

In our own democracies, this mean much more than just elections; there are lots of checks and balances in our systems that prevent cheating; however, we have not translated this to the nations of the bottom billion. These institutions take time to build, and governments resist building them. The only people that cheating elections fool are the west, not the citizens of the nations; ordinary citizens simply get infuriated by the entire process and blame the west for the continued failings.

There are many aspects to accountable government; the first is the amount of money that is raised; conditioning aid to policies does not work; governments need to be accountable to their own citizens, and not to donors. Aid needs to be tied to governance. The alternative to money being well spent is to further empower the crooks stealing it, creating a vicious cycle.

In low income countries, democracy is seen to be linked with an increase in societal violence.  Thus, we should not abandon democracy, but we need to make security a strategic priority in addition to democracy. This can be done through security guarantees through coups and western nations guaranteeing true democracies intervention from coups. This is already happening with Australia, as can be seen with East Timor; if the Australians had guaranteed that if there was  a coup the Aussies would put it down, they would not of had to actually do it a few years back. In Africa, as long as the elections were well conducted, they could be protected.

Smart power needs to be used; a small amount of hard power combined with more soft power is the necessary combination if used intelligently.

Collier: Wars, Guns, and Votes: Democracy in Dangerous Places

Paul Collier

Wars, Guns, and Votes: Democracy in Dangerous Places

LSE Lecture Notes

The Bottom Billion was about poverty, looking at the poverty problem differently; 60 countries, with about a billion people, have diverged from the rest of the world, and we need to, as a result, rethink poverty in addressing these people

Paraphrasing Collier:

Wars, Guns, and Votes is about power. Weaknesses, insecurity, and the abuse of political power in these nations. The book starts with the proposition that the international community is in a phase of denying reality. We then need to face reality, in order to effectively change reality. The purpose of the book is getting realistic strategies for change. 

“The countries in the bottom billion are in the paradoxical situation of being too large to be nations, but too small to be states.”

The states that we see in Europe emerged as solutions to problems. The boundaries are not intrinsic, they are solutions to problems, the biggest of these being security. Going back in history, proto-states existed in Europe, were tiny, and ruled by thugs. There was then an arms race by these thugs to get the bigger army, in order to expand against their neighbors. The bigger militarized states swallowed up the smaller, and these states were able to provide internal and external security, as a result. This resolution also solves the problems of nationalism, or forging a common sense of national identity, which has been forged so well in Europe, this myth of common identity, as well as the problem of building accountable states. The ones who can spend most on the military as the ones who won the arms race, and these were the ones who were able to build the best taxation to fund their armies, and thus, a degree of good governance as a result, as their taxation relied on the citizens of their states. Thus, the result of the militaristic conquests by early European states is good governance, accountability, and security.

In the bottom billion, the situation was completely different. They were suddenly colonized and broken up into colonial groupings that were split and split and split again into 54 countries, usually very small. These little countries are too large to be nations because there is no process for building a common sense of identity; there is no equivalent to the warfare in Europe that build nationalism; as a result, there is a weak sense of national identity, but a strong sense of sub-national, normally ethnic, identity. This brings a lack of compliance in providing public goods as a result. National identity brings the delivery of public goods.  And yet, too small to be states. Looking at where size matters, economic activity is what needs to be measured, and the typical African nation of the bottom billion is tiny. They cannot reap the scale economies that are intrinsic to effective public goods. Thus, supply is inadequate in the provision of public goods, most especially being security and accountability, is sorely lacking.

Looking at the standard public good of defense, providing against external and internal threats, normally internal threats in Africa, as a result of the geo-political consequences of non-interference and sovereignty. Internal insecurity is the biggest issue with these states; the level of the public good of security is not high enough to maintain internal peace. Rebellion is quite rampant and easy in these nations as a result of low income, low growth, dependence on primary commodities, and small economic size-these are all structural features of the bottom billion. If rebellion is so easy, the dilemma is how to secure the state, as the other challenge to the state is from the coup de etat. So, they need a strong military to defend from rebellion, but a weak military to defend from a coup. See: Mobutu’s Zaire-he emasculated his army completely to lessen the feared risk of a coup; as a result, when a tiny rebel group from Rwanda invaded the country and took power in a rebellion. This is a dilemma that leads to no effective way to provide for security in these nations. The risk of conflict is a major deterrent to private investment, and also spill over, cost-wise, to the neighborhood.

Looking at the public supply of accountability, which is not the textbook public good like security, we face another dilemma. First, we need to look at the false goal of the China Model in this argument, as they lack accountability and have grown dramatically; to address this issue, there is a huge dispersion in the success of this model; China is very big, relatively, but also very cohesive, with a strong sense of national identity; thus, there is not a massive divergence in terms of goals between the elite and the masses-both want a strong China; however, in other fractured bottom billion nations, there is a huge gulf in these interests between the autocratic elite and the masses, which is seen again and again. Thus, democracy and accountability is not necessary for China, but it is for the small, fractured nations of the bottom billion.

Accountability comes from the government providing the institutions, and citizens having the freedom to make these work, and also citizens being provoked to scrutinize accountability. The provocation in Europe was taxation and representation; in the bottom billion, taxation is low because of aid and resource rents; the institution that has been promoted in the last 15 years has been elections. Elections force the government to improve economic policies. But only if the elections are properly conducted. Where elections are not properly held, there is, at best, no effect on economic policy, and usually a worsening of economic conditions, as a result.

Bribery, intimidation, and ballot fraud are the three tactics that boost incumbents in elections. In elections that are not properly conducted, the incumbent is only worrying about how long they can stay in office, and they rely on these three variables to both increase their terms and get them off the hook for providing good economic management. If there is a valid election, good economic performance adds to the chances that you will be re-elected. If you resort to bribery and corruption, good economic governance is actually a hindrance to your power consolidation.

Small states are much more prone to these problems-power is very easily personalized in these small societies; in larger societies, you need to quickly institutionalize power. Personalized power often goes very wrong. Poor, small, and dependent on natural elections are the biggest three features that drive crooked elections. These are all features of the bottom billion.

What is to be done?

Above a certain threshold, democracy makes a society safer (2500$). Below that threshold, it makes the society more dangerous. If nations democratize below this level, they still have security issues.

Regional solutions to public supply deficits: spillover is great to neighborhoods from conflict, so it makes sense to pool resources; however, neighbors have illegitimate interests in this issue, such as with Ethiopia trying to bring security to Somalia. The dilemma for the regional supply is the  only countries with a real interest in supplying security are often debarred. In terms of regional accountability solutions, efforts have not been impressive (look at Zimbabwe). The Presidents of the bottom billion are sovereignty-retentive and are not willing to share sovereignty. Look at successful models such as the USA, in which states learned to share sovereignty, or the EU. Bottom billion nations need shared sovereignty much more than developed entities such as Germany and California, but they refuse to budge on this issue. In these nations, power is massively centralized in the Presidency, and they will not share this power.

International Solutions to public supply deficits: Why should there be “African solutions to African problems?” They are living in entities that cannot solve the problem of public good supply, and we are. This is not colonialism, mark two. The international supply means: Security-post conflict peace keeping-this is effective-these environments are very risky (40% chance of recidivism); peacekeepers are needed for the first decade to bring the risks down for relapse. It is expensive, but much more cost effective than the cost of conflict. Peacekeeping is a good use of international resources, and is a good value for the money; however, we do not look at it in this light. Aid is looked at as good value, but not peacekeeping. Peacekeeping expenditures should be included in the envelope of overall development. Accountability should be looked at through the prism of money. However, the accountability of governments to their own citizens is what is the problem. Providing money without questions creates problems with corruption through capture; it is empowering the very people who are driving the bottom billion into the ground. Independent verification of budget systems warranting budget support needs to be implemented; in countries that are not fit for budget support, it is irresponsible to provide this support. There needs to be capacity building support to bring these economies up to speed for budget support.

Illicit conduct in elections: how can we make accountability to citizens effective by discouraging cheating in elections? Aid is not sufficient to make Presidents want to cut short their terms. What are Presidents really scared about? Coups. In Africa there has been over 90 coups. They are condemned by the International Community, but we do nothing. So, what can we do? These militaries are relatively feeble, and these coups can be put down relatively easily. This should be offered to democratically elected governments. Any government that undertakes a democratic election should be given a warranty against coups. This would make the cost too high to the internal militaries. This carrot inadvertently turns into a very large stick; suppose a President cheats in an election; when the international community scrutinizes the election, and the president cheats, the guarantee against coups is repealed; this is an invitation to Presidents not to steal elections out of fear of coups, as an inadvertent result.

Look at Senegal: the President-for-life had huge support in the rural areas, and the opposition in the urban areas. When the results came in, the opposition started to pull ahead; then, the President accepted defeat even before the results were counted in the rural areas. A few months earlier there had been a coup in Ivory Coast that was not put down by the French, and this scared the Senegalese President, as the army came in and told him that if he stole the election, they would hold a coup. The President had the option of stepping down honorably, or being displaced in a coup. This is the power of the threat of a coup and shows the value of this warranty.

Collier, The Bottom Billion, and a Summation on Trade and Aid

On the role of the aid agencies:

“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.

Collier, the Bottom Billion, and a Novel Approach to Corruption

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.”

(150).

Collier, The Bottom Billion, and Independent Service Authorities

Independent Service Authorities

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.”

Collier, The Bottom Billion, and "What is Aid's Best Roll?"

And Thus, What is Aid's Best Role?

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.)

Collier, The Bottom Billion, and "Aid to the Rescue?"

“Aid to the Rescue?”

“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, The Bottom Billion, and "Private Investment to the Rescue"

Private Investment to the Rescue

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 Bottom Billion and Globalization/Economies of Agglomeration

Globalization and the Bottom Billion

“...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.”

Collier, The Bottom Billion: The Resource Curse, Aid, and The Road Ahead

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.

Civil War and Postconflict: The Bottom Billion

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.





 

Collier, The Bottom Billion

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).