The Bottom Billion — Why The Poorest Countries Are Failing and What Can be Done About It

First some background:

There have been several initiatives to put an end to poverty in the world. In fact in 2000, the UN specifically developed the Millennium Development Goals for this. The goal was to build a fully inclusive world by 2015, but unfortunately, many of these goals haven’t been realized.

Professor Paul Collier, an Economics graduate of Oxford who has worked with development agencies like the World Bank, brings his insights from research and experience towards solving this problem through the book: The Bottom Billion.

In 5 simple parts, he:

· identified what the developmental challenge was,

· the traps the bottom billion find themselves,

· whether globalization can help them,

· Instruments to effect a change,

· And defined a course of action.

Let’s explore his mind:

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Part 1: What’s The Issue?

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People (and organizations capable of effecting a change) generally view the challenge of development as a rich world of 1 billion people against a poor world of 5 billion people. To a large extent, they have dealt with situations this way.

But Paul explained that most of the countries in the 5 billion class are developing at an amazing speed and the real challenge of development now lies in a special class of countries who are static, falling behind and too often, falling apart.

These countries are stuck in some TRAPS and are increasingly diverging from a growing world economy. He estimated them to be about 1 billion people in 58 countries, 70% of which are in Africa, and if anyone wants to effect a real change, efforts should be directed towards this class — the bottom billion.

Paul also identified the need to focus on “growth rates” instead of “development goals”. While the MDGs are lofty and good, the focus shouldn’t be on just sending girls to school but on real, economic growth.

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Part 2: The Traps:

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Now some countries are advancing but others are stuck. Why is this so? The answer is TRAPS.

Paul identified 4 developmental traps responsible for the stagnation of the bottom billion.

These are:

* The Conflict Trap

* The Natural Resource Trap

* Landlocked with Bad Neighbors

* Bad Governance in a Small Country

1. The Conflict Trap:

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Conflicts come in the form of civil wars and coups in The Bottom Billion. Typically, a civil war is any war resulting in over 1000 deaths in which both sides incur at least 5% of the deaths (over 50).

Three major factors make a country prone to civil wars. These are: low level of income (which means the majority of citizens live in abject poverty), slow economic growth (which invariably means hopelessness) and dependence on some primary commodity as major means of foreign exchange (which usually motivate greed).

Civil wars bring about an economic decline of 2.3% per year amidst chaos, disease and starvation.

Yet the bottom billion stand only a one-sixth chance of escaping a civil war within a five-year period.

2. The Natural Resource Trap:

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This causes Dutch disease (inability to diversify exports) and the inherent boom-bust cycles of resource revenues lead to more debts due to mismanagement.

Worse, natural resources make democracy malfunction as leaders become so fixated on winning the next election that they put little or nothing to investments. They would rather loot to buy votes, and in such countries, it is usually a vicious cycle of patronage politics.

Most countries in the bottom billion are also plagued by this.

3. Landlocked with Bad Neighbors

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To be landlocked means you’re surrounded by land and cut-off from the coast. This prevents access to a global market. Landlocked countries typically play hostage to their neighbors who serve as transport corridors to the market.

Countries landlocked with good neighbors enjoy decent transport links to the coast, directly sell to their developed neighbors, and enjoy spill-over growth from their neighbor’s prosperity. In fact on average, every 1% economic growth of such neighbors results in a 0.7% spillover growth for such countries.

Unfortunately, this isn’t the case when you’re landlocked with bad neighbors. A country like Uganda is surrounded by poor countries and face the exact opposite of the benefits above. Neighbors themselves battle their problems and there is little or no luxury for spillovers.

This pain aggravates when you’re not only landlocked with a poor country but also resource poor. It takes a multiplicity of strategies to escape such trap.

4. Bad Governance in Small Countries:

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The final trap is bad governance. It is first important to note that Good governance and policies cannot effect a change by themselves; they can only allow a country to maximize available opportunities. This can boost economic growth to within 10%.

But unfortunately, many of the leaders in the bottom billion are villains, and even when heroes exist, there is a shortage of economic reform experts with the requisite knowledge to effect a change.

The few who get the needed trainings often leave for saner climes, and when they don’t, brave reformers get overwhelmed by the forces pitted against them before they can see a strategy through.

Good governance and policies enable a country to maximize available opportunities.

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Part 3: Will Globalization Rescue The Bottom Billion?
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Globalization means integrating into global markets. This is viewed in terms of trade, free flow of capital, and migration between countries.

Currently, about 80% of exports in developing economies focus on manufacturing and service-based products. Unfortunately, the bottom billion can only trade natural resources which puts them at more risk of the natural resource trap.

On capital, the economy of the bottom billion is small and risky. This doesn’t attract private capital investments and the bottom billion often strain their personal coffers amidst a high risk of mismanagement. Thus, there is huge capital flights in the bottom billion.

Finally, emigration selectively removes the educated in the bottom billion and drains them of their talents. This puts them at the risk of bad governance and policies

So globalization doesn’t yet work, and will need a range of strategies to be effective.

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Part 4: The Instruments

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Here, Paul discussed 4 instruments used by development agencies that can help the bottom billion.

These are: aids, military intervention, laws and charters, and trade policies.

Aids:

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Until now, efforts have mostly been directed towards aids with little results. Development agencies tend to give aids as:

* incentives for economic reformations,

* tech assistance to build the capacities of locals

* economic reinforcements through budget support and debt relief. This is not without some risks.

But instead of just giving aids, Paul recommended that specific aids should target the traps that exists in such countries. For example, aids given to landlocked countries are best put to use when they improve transport links to the coast. Aids targeted towards the natural resource and bad governance trap should encourage economic reformation and private capital investments.

The Next Instrument Is Military Intervention.

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This is a delicate topic considering the Iraq and Somali disaster.

However, Paul recommended military intervention is still necessary citing the British intervention in quelling the RUF rebels in Sierra Leone as the perfect model of an effective military intervention. When the world stuck its head down and ignored things in Rwanda, the effect resulted in over half a million deaths. This further proves how important it is to intervene.

He identified what was wrong in the current method of military intervention; how soldiers and governments feign care.

Now on Laws and Charters…

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Western economies have become safe havens for corrupt officials from the bottom billion — safeguarding their loots and protecting them. This is a betrayal of the primary objective of rescuing the bottom billion and Paul recommended the need for regulation in this regards. This should be done by developed economies, and the current laws against bribing of foreign officials should be effected.

On the part of the bottom billion however, charters are more effective. Unlike brute laws, charters involve setting internationally acceptable standards and norms; codes of conduct to guide actions. The idea is to force the villains in the bottom billion to succumb to progressive policies from their counterparts. This is like the EU effect and Paul recommended the need for charters for: natural resource revenues, democracy, investment, post-conflict situations and budget transparency.

Finally, Paul talked on the need for Fair Trade Policies that will reverse marginalization.

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In his words, “it is stupid to provide aids with the primary objective of development and then adopt trade policies that impede this objective.”

He mentioned the need to reduce tariffs on processed materials; which makes it difficult for the bottom billion to diversify their exports.

The idea here is to make it easy for the bottom billion to trade inclusively.

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Part 5: The final aspect of the book defines A COURSE OF ACTION.

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Here, Paul matched the respective traps to specific instruments as a way to begin action right now.

To break the conflict trap, he recommended aids, carefully spread over several years for post-conflict management, and he recommend a combination of the four instruments to prevent falling into conflict.

To break the natural resource trap, he recommended foreign laws and international norms (charters) as the key instruments of change. This will help the brave reformers who amidst the odds are trying to effect a change.

Landlocked countries require different aids to help them depending on the countries. For example, he recommended budget support for Malawi and Uganda, and policy conditionality for Chad and Central African Republic. This should be aided by military intervention to prevent a coup or overarched military spending.

Bad governance simply require economic reformations aided by laws and charters.

In conclusion, helping the bottom billion has been a subject of a right-left divide where the left believe in PROVIDING MASSIVE AIDS and the right believe growth is there for the taking if the bottom billion were serious.

But Paul is promoting a thin line of sanity: that aids, though important, needs a WIDER RANGE of POLICIES and interventions to be effective; and that the bottom billion can simply not help themselves.

“Rescuing the bottom billion will come from within but we all have our roles to play,” he concluded.

The book is altogether awesome as Paul interrupted the research, data and long-winded sentences with sarcasm and humor.

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To summarize:

One billion people are suffering because they are in some traps

Globalization can’t help them yet,

And all the INSTRUMENTS of change must be strategically used to effect a change.

Paul Collier then gave a defined course of action.
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That concludes the book.
Thank you for reading.