Some remarks on Paul Collier's The Bottom Billion by MT Nguyen, NYC

The numbers for poverty-related deaths (deaths from easily curable disease and famine) are staggering. I won’t cite specific numbers, since such numbers rely on complex methodologies which appear to change from researcher to researcher. But, it is not, I don’t think, contentious to put the ballpark number in the millions. So, we have in our world millions of preventable deaths. The idea that these are preventable deaths poses a whole host of questions and problems. Preventable at what cost? Who should bear the responsibility? For those willing to bear the responsibility, what precisely should be done? One might think that shifting wealth from the developed world to the undeveloped world would be sufficient if only the amount of wealth is sufficient. Is this true?

It is a documented fact that Americans are givers. A recent study on charitable donations by the Giving USA foundation reported that Americans gave around 295 Billion dollars in 2007. We can’t know the motivation behind the donations, and this might make a difference to our overall assessment of our nation as charitable and generous. But we do give. Why doesn’t it seem then that much has changed? Is it not enough? The amount of American charitable giving is incredible considering that some estimate it would require only 300 billion/year to arrest severe poverty in the world (understood as living under $1US/day). Even less is required (very roughly, $150 billion/year) if, as it is in the Millennium Development Goals, the target is poverty reduction by half by 2015. By that measure, we Americans alone give enough. So, what’s the problem?

The problem is that money alone is not sufficient. There are structural impediments to the correct use of aid. The main lesson I take from Paul Collier’s fine book is that practical judgment, informed by acute sensitivity to the particulars of the situation, makes all the difference to the fine line between successful and failed aid. If eradicating poverty is the goal, the primary question is not whether or not we should give, rather the problem is when to give, where to give, what to give, and how much to give. At least this is Collier’s contention specifically with regard to aid to the worst off.

Collier refers to the worst off with his coinage ‘the bottom billion’. The phrase is not just a rhetorical nicety; it has a real referent and economic significance. The bottom billion persons live in countries (58 of them by his count, including many African countries but also Laos, Haiti, Bolivia, Cambodia, Burma and n. Korea) with characteristic features, features which are the main project of the book to describe. The economic significance is that these countries, unlike the countries housing the other 5 billion inhabitants of the world, are in economic decline. Collier is a firm believer in the power of economic growth to improve the quality of life. One point the book tries to impress is that economic decline (negative absolute growth) implies misery, violence and finally death.

His explicit thesis is that bottom billion countries are caught into ‘traps’ which undermine aid and other efforts at economic reform. They are, in order of explication, the conflict trap, the natural resource trap, being landlocked and poor governance. These are isolatable conditions but they each bear significant relationships to one another. I won’t try to describe, let alone assess, Collier’s treatment of these traps. My aim is merely to mention a couple of the interesting and striking claims he makes. It is important to keep in mind that the conclusions he draws are meant to apply primarily to bottom billion countries.

The conflict trap refers to the ongoing civil wars and coups that afflict these countries. It would appear obvious that conflict would undermine economic growth but along with his colleagues, Collier has tried to uncover the deeper reasons for this connection. We might have speculated that poverty leads to conflict because the motivation to war is grounded in the desire to rectify domestic injustices (political or economic). According to Collier, this is simply not the case. There is no correlation between civil conflict and political repression, economic inequality or ethnic antagonisms. Rather, the startling thesis is that conflict arises in impoverished countries in part because rebellion is cheap: the impoverished youth are easily recruited. Additionally, the likelihood of civil war is increased significantly if the country happens to be rich in natural resources, which resources can be used to finance the conflict. More perniciously, corporate financing becomes available in exchange for promises of future deals should rebels succeed.

That access to natural resources should be undermining is counterintuitive yet well established. Apparently, economists have known about this phenomenon for some time. They call it Dutch Disease. Basically, the wealth gained from natural resources crowds out a country’s other export industries, which industries are instrumental to future growth. This is most significant for bottom billion countries since for them the exportation of cheap labor is one of the primary avenues for economic growth. The problem goes deeper than that, and one of the unexpected pleasures of reading Collier’s book is his discussion of natural resource wealth (what is called ‘rents’) and its effects on political competition. His discussion is ingenious.

Wealth accumulated from natural resources affects the use of power in a democracy. By reducing incentives to scrutinize government action (less taxes are required), instead of using infrastructure investments to gain votes, those in power or those who vie for power focus primarily on bribing community leaders. Those who fail to do this lose elections. Bribery of course requires cash, illicit cash. Typically, various checks (a strong judiciary, a free press, etc.) would make obtaining such cash costly. In their absence, an absence facilitated by monies gathered from rents, the politics of patronage becomes almost irresistible. This is bad for growth. What’s better? Strictly in economic terms, autocracies do better than democracies under such conditions. However, autocracies, in turn, undermine growth as well. To sustain power, especially when the autocrat’s support base is small relative to the overall population, resort to excessive patronage once again leads to waste. This is why having natural resource wealth is a trap; the most accessible political options are both suboptimal.

The trap explains why indiscriminate wealth transfers cannot be a general solution. Either a resource rich nation rebuffs the conditions usually tied with such transfers, or else it ‘accepts’ them only to use the wealth solely to further the hold on power. One solution Collier offers is that, instead of transferring money, aid should take the form of technical assistance. Reform requires knowledge, and this is precisely what bottom billion countries lack (because the educated have emigrated to developed countries). But even this form of aid is not beneficial unless it is offered at the right time. The country must be already prepared to use the skills imported. What he says here can be said, I think, about all forms of aid:

The problem is not the overall insufficiency of technical assistance but rather that it is organized so as to be unresponsive to [sic] country circumstances. In the parlance of the agencies technical assistance is supply-driven rather than demand-driven. The assistance is poured into the same places year after year without much regard to political opportunities…Technical assistance needs to be reorganized to look more like emergency relief and less like a pipeline of projects.

This may seem obvious, but evidently our aid institutions are not set up to be flexible in the required way. The chief lesson of Collier’s book is that in order to be true benefactors, we need to have a detailed empirical understanding of the conditions under which suffering peoples exist.

There are many other fascinating and helpful discussions in Collier’s book. I have taken up only one small thread, and strongly encourage others to explore this important contribution to see for themselves.