Book review: The Bottom Billion by Paul Collier

With "The Bottom Billion – Why the poorest countries are failing and what can be done about it", Paul Collier, Professor of Economics at Oxford University has written one of the most convincing and exciting books about development I have read so far. In this book Collier provides a long overdue new way of conceptualising development. For many decades the world has been divided by academics in a developed world with roughly 1 billion inhabitants and the third world containing the rest of the planets population. This distinction however, is becoming increasingly unhelpful as many of the once so called third world countries are advancing with great steps and have become important players in the global political and economic arenas. There is however a group of countries with roughly 1 billion people that remain stuck in a vicious cycle of poverty and political instability.
The concept of the bottom billion refers directly to this group of countries and does not imply that there are no poor people outside the bottom billion countries. Countries like India, China, Brazil or the Philippines still host millions of extremely poor people that might live in similar dire conditions as people in the bottom billion countries. The difference is however, that these countries have entered a rapid growth path that is successfully lifting ever larger parts of the populations of these countries out of poverty. In the bottom billion countries no such dynamic exists and they remain therefore stuck. The logical policy advice of this analysis is of course that development actors should focus their energy and attention to the countries of the bottom billion.
Collier does not provide a list of the bottom billion countries but mentions that they are currently made up of fifty-eight countries (For a list of the bottom billion countries turn to Collier's latest book „Wars, Guns and Votes“). Most of these countries are in Africa, but there are also countries in Asia and Latin America that form part of the bottom billion. The characteristics of the typical bottom billion country are a very low per capita income (read extreme poverty), low or negative growth rates (read no hope for change) and persistent political instability (read civil war, corruption and non effective government services).
After conceptualising the group of the bottom billion countries the question is why these countries are falling behing when the rest of the world has rapidly advanced on all major development indicators. Collier's explanation is that these countries are stuck in at least one or more of four traps that lock them into a vicious cycle. The four traps are: (1) the conflict trap, (2) the natural resource trap, (3) landlocked with bad neighbors trap, and (4) bad governance in a small country trap. Fortunately, Collier does not make use to the theory of poverty being a trap in itself. If a poverty trap as such would exist, no country would have ever developed as all were initially poor.
The conflict trap is the first trap that Colliers deal with in his book. He provides the shocking statistic that seventy-three percent of the people in the bottom billion countries have recently experienced civil war or are still in a state of civil war. Civil war as such does not need to be a trap as many of the now developed countries have gone through civil war. The difference is however, that for the bottom billion there is an increased risk of repeated civil war because of low income, slow growth and dependence on primary commodities. Civil war affects these other factors negatively and vice versa.
The second trap is the natural resource trap which is sometimes also referred to as resource curse. This trap is somehow paradoxical as one would assume that the occurrence of natural resources in a country is rather a blessing than a curse. However, the political economy of resource rich developing countries is often characterised by fighting of different political or ethnic groups over the control of the revenues that flow from the resources. The resource curse can therefore hinder the development of democracy in a country as politicians become obsessed with getting an ever larger part of the resource rents for themselves. The export of primary resources can also negatively affect the development of the rest of the economy through what is called the „dutch disease.“ This refers to the phenomenon that the export of resources can lead to an unfavourable exchange rate that stifles the rest of the export economy.
The third trap refers to landlocked countries wit bad neighbors. Africa hosts a number of such countries, like for example Burundi, Rwanda,Uganda, and Tchad. Because of geography these countries have great difficulties in positively participating in globalization. Anybody who would want to set up a factory in a place like for example Burundi would need to produce for export as the local market is just to small. In order to reach international markets goods from Burundi would first have to be brought to Mombasa in Kenya from where they could be shipped to markets across the world. However, the cost of transporting goods from Burundi to Mombassa is so high that goods produced in Burundi could never compete with for example goods produced in Bangladesh which has direct access to the sea. Furthermore, landlocked countries are dependent on their neighbors transport infrastructure to import goods. This explains that many of the landlocked countries are ultimately dependent on their neighboring countries for their economic development. A reasonable conclusion of this is that some of the landlocked African countries should maybe never have become independent states as they do not form economically viable units.
The fourth and last trap is bad governance in a small country. Bad governance refers to bad policies and endemic corruption. According to Collier, countries with small population sizes are more likely to suffer from bad governance as they have a smaller pool of human resources to draw on for designing and implementing effective policies. Many of these countries suffer from a „brain drain“ where the young and talented leave the country because of the lack of opportunities back home. Some of the countries with bad governance even become failed states like for example Somalia or Afghanistan. These countries form the very end of human development and the international community so far has not found an effective way of fixing failed states.
Are countries in the bottom billion doomed to be eternally locked into the four traps? No, according to Collier these traps can be overcome but it is hard for the bottom billion countries to do it by themselves. Overcoming the traps therefore warrants the help of the international community. Collier suggests four instruments that can be used to help the bottom billion countries. The four instruments are: (1) development aid, (2) military intervention, (3) laws and charters, and (4) trade policy for reversing marginalization.
The first instrument is development aid which has been the standard answer by the developed world with regards to the development problems of poor countries. Development aid is however increasingly coming under criticism as the last forty years of aid have brought little progress in the poorest countries. Collier is therefore sceptical about calls for simply injecting more development aid money to poor countries to solve their development problems. An interesting example that Collier gives in this respect is that in many bottom billion countries there is no shortage of money generated by the sale of natural resources. The oil revenues in countries like Angola or Nigeria simply dwarf the amount of aid given to these countries. Nevertheless, the billions of dollars generated for the state through the sale of oil have so far not brought the expected push for development. In such cases it is therefore difficult to argue for more budget support given by international donors as the problem is obviously not a shortage of government revenues.
In some bottom billion countries with no revenues from oil or minerals development aid already constitutes a large part of the annual state budget. Increasing this share further or even doubling it as proposed by some aid advocates might lead to a situation where these states are completely dependent on aid with all the negative effects this can have.
For Collier therefore it is clear that traditional development aid has its limitations to solve the development problems of the bottom billion. Nevertheless, Collier maintains that aid can play an important role when it is better targeted at supporting reformers and reform processes with the right mix of technical assistance and budget support given to countries that are willing to improve on governance.
The second and probably most controversial instrument Collier suggests is the use of military intervention. Collier argues that despite the bad experience of the Iraq and Afghanistan war the international community should consider using military intervention in the bottom billion countries as one instrument of helping them to develop. Collier gives the examples of Rwanda and Somalia where he says that with more decisive and timely military intervention the suffering of millions of people could have been averted. As positive example for a military intervention Colliers mentions the case of Sierra Leone where the British government with a relatively small number of troops managed to bring an end to a bloody civil war. An interesting suggestion put forward by Collier is that the international community should give a sort of military protection against coups. Such a protection against coups should only be extended to democratically elected governments. Collier argues that this might bring more political stability and make it easier for reformist governments to go against entrenched military interests.
As third instrument Collier suggests the use of laws and charters. One way of changing laws to benefit the bottom billion countries that Collier puts forward is to stop the deposit of money stolen by corrupt governments on bank accounts in the developed world. Linked to this Colliers also suggests that companies involved in bribing should face legal prosecution in their home countries. Besides changing laws Collier advocates a number of international charters that would bring benefits to reforming governments in the bottom billion. The most interesting of his suggestions is a charter for natural resource revenues. As part of this charter Collier recommends that contracts for natural resource extraction should be auctioned off in an international process. This would ensure that governments award the contracts to the highest bidder and not to the one paying the largest bribe. This would then also imply that contracts which were not awarded in a transparent process would not be legally binding for reformist governments.
As fourth and last instrument Collier suggests a trade policy for reversing marginalization. Collier starts this section of the book with an attack on NGOs and particularly Christian Aid United Kingdom, claiming that trade policy was the area of economics least well understood by the NGO world. The problem for the bottom billion according to Collier is not that they have been exploited by international trade and processes of globalization but rather that they have been bypassed by globalization. Collier then goes on to advocate for an active trade policy by the developed world that would help the bottom billion countries to build up their export capacities.
In the last section of the book Collier sets out an agenda for action. He suggests that the international community should use all four of the above mentioned instruments to varying degrees depending on the needs of each bottom billion country. In order to make change happen, Colliers calls upon the public in developed countries to be more informed about development issues and to go beyond simply advocating for more aid.
With The Bottom Billion Paul Collier has written a fascinating work of political economy, full of insights and relatively easy to read considering the complexity of issues presented in the book. Most importantly Collier's analysis of the development problems of the bottom billion countries is not rooted in outdated ideology but in good science. He avoids falling on either sides of the extremes (Easterly and Moyo vs. Sachs) when it comes to the current debates about development aid and provides a refreshingly new perspective to many issues. The Bottom Billion is easily the best book about development in the last decade.
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