Paul Collier’s important new book, The Bottom Billion, refines and clarifies our view of the developing world in a way analogous to the Bangladeshi economist Muhammad Yunus’ work on the problems of the poor. Just as Yunus focused on the poorest of the poor, showing how they are the ones to benefit least from any development agenda and so need a special approach (like his method of microcredit supported by peer networks), a key insight is that not all developing countries face the same issues or can benefit from the same kind of remedial approach.
The Bottom Billion: Oxford University Press, 205 pages, Rs525
For several decades, it was common practice in economics to contrast the industrially developed first world against the developing nations. But over time, as a set of nations (most significantly India and China) have shaken off low growth and pervasive poverty, the situation has changed so as to become almost the reverse.
Now, the world’s population can be broken up into five billion people who are either already prosperous or on track to be so, and one billion, mostly congregated in a cluster of failed or failing states in Africa and Central Asia, stuck at the bottom with no hope of progress despite the winds of change ushered in by globalization. The neglect of these countries may soon become a security nightmare for the world.
Collier’s contention is that both the developed and the developing world need to devise a targeted approach towards this bottom billion, involving the coordination of several instruments, such as aid, trade agreements and international charters. His book, born out of long years of engagement with Africa, is a more nuanced and sophisticated work than two other recent high-profile books on the issue of world poverty—Jeffrey Sachs’ The End of Poverty, which stresses the role of Western aid in the regeneration of Africa, and William Easterly’s The White Man’s Burden, which asserts that aid is unproductive.
The great virtue of Collier’s work is the extent to which his arguments are buttressed by empirical, solidly quantitative evidence lucidly woven into his highly readable text. For example, he has synthesized a great deal of scholarship on the workings of failed states. Many of these nations are racked by what Collier calls “the conflict trap”, which is the interdependency of chronic poverty with civil unrest or outright war, making for a vicious cycle.
But Collier also shows how one of the paradoxes of world poverty is that the poorest nations suffer disproportionately from “resource-rich poverty”. Studies show that the discovery of valuable natural resources such as diamonds or oil actually tends to stifle economic growth by crowding out traditional export-directed activities such as manufacturing and services even as it undermines democracy and ushers in the politics of patronage.
How can these problems be overcome? Collier concedes that the critics of financial aid have a point: A significant chunk of this money is never invested in public services and infrastructure as it should. But with experience, the channels through which aid is delivered are being refined and his view is that aid, over-hyped though it is, is part of the solution and not part of the problem. His more significant insight has to do not with aid as with the other poverty-alleviation mechanism: trade.
He argues that although those on the right are correct in arguing that globalization in general leads to poverty reduction, the problem of the bottom billion “will not be fixed automatically by global growth”. This is because the global market is far more hostile to new entrants than it was in the 1980s, when Asia broke into the global economy with low-cost services and manufacturing.
The next window of opportunity for the states which house the bottom billion is probably when Asia becomes rich enough for comparative advantages to come into force again, but that is several decades off. In the meantime, these countries need a targeted approach, in the form of aid, reduced tariffs on their exports, and even military intervention in the case of civil war if they are to become stable.
This is a work of great importance because, as Collier says, popular thinking on the issue of development is rife with foggy and unhelpful cliches. In particular, the issue of foreign aid seems “to bring out the worst in both left and right”. The Bottom Billion supplies a panoply of arguments and conceptual tools that allow for a more sophisticated understanding of development economics than those currently in vogue.
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