The Bottom Billion, Book Review

As some of you know, my wife grew up in Zambia, a small country in south-central Africa. We took a trip there in January. Our trip coincided nicely with this New York Times article. In brief:

China’s economic slowdown has caused Zambia’s economy to tumble. Thousands of jobs have been lost, and the outlook is now so grim that Zambia recently held a national day of prayer to revive its currency, one of the world’s worst performers this year.

In the wake of such news, we couldn't ignore the economy in Zambia that had changed so much from the last time we visited. What's more constant is why it remains an extremely poor nation in spite of the good years it has had. My brother-in-law suggested I add The Bottom Billion to my reading list. I finished the book roughly one month ago.

Sir Paul Collier is a professor of economics and public policy at the Blavatnik School of Government at the University of Oxford. Considered a preeminent voice in matters of government economics. Collier is a renowned expert in the developmental issues faced by the poorest countries.

Just to give you a look, here is Collier (a few weeks ago) discussing his perspective on the recent Brexit vote:

In The Bottom Billion, Collier provides an answer to the subtitle: Why the Poorest Countries are Failing and What Can Be Done About It. Collier uses a non-partisan research-based approach to shine light on issues with our current thinking about poor nations and the cause(s) of their plight.

Collier's calm, centrist demeanor is apparent throughout the literature. He is no wild-eyed entrepreneur proposing silicon valley style panaceas. It's clear that there are no easy answers.

Poor countries fall into one or several of four categories according to his research. These categories are called traps. Traps are the foundational factors that specifically limit a country's growth. These traps are not unique to the poorest countries. Poor countries exhibit them in the greatest frequency and severity. They are as follows:

1) The Conflict Trap
2) The Natural Resource Trap
3) Landlocked With Bad Neighbors
4) Bad Governance in a small Country

If you take a country like Sudan for example, you can see that it falls into traps 1, 2, and 4 (Sudan has access to the Red Sea and the Bab al-Mandab Strait to the Arabian Sea).

From Nations Online (nationsonline.org) Image from nationsonline.org

Collier hit some high notes sharing his thoughts for remediation. High notes in the sense that they were extremely pragmatic and well researched. Several sections I found noteworthy:

Nuanced critique of foreign aid

Aid, like other natural resource revenues, tends to make other exports uncompetitive. The IMF feels so strongly about this tat its current chief economist, Raghuram Rajan, a smart academic on leave from the University of Chicago's business school, launched a blistering public critique of aid in June 2005, just ahead of the G8 summit... His research showed that aid tended to retard the growth of labor-intensive export activities, precisely the activities needed for diversification in the bottom billion. (page 121)

International norm setting

Norms are voluntary and are effective because they are enforced by peer pressure. Over the past fifty-years the world has generated a huge range of them, enshrined in international standards and codes... To see how effective, look at Eastern Europe over the past decade. The typical situation was that the countries of Eastern Europe, having escaped from the Soviet bloc, wanted to lock themselves into being market democracies. They had one hugely attractive option to hand: membership to the European Union. (page 139)

Encouraging and protecting private investment

Page 154-156 provides a window into the complicated issue of protecting private investment within bottom billion countries. Collier would assert that the countries very much need private investment. This investment comes from within the country, and outside the country.

Private investors face a catch-22 situation. Investing in bottom billion countries tends to expose private investors to massive sovereign risk. Protecting investors via international charters and agreements is murky. It's been opposed by thug dictators and well-meaning NGOs alike. Thug dictators (Idi Amin, Mobuto Sese Seko, Robert Mugabe, and others) oppose international charters for the obvious control it asserts over their corrupt regimes. NGOs, on the other hand, have mixed feelings about international private investment agreements that tend to be written and voted upon by rich countries, alone.

The end result is a chicken or egg problem. Money needs protection. Protection requires ceding some control to international standards.

The middle road to growth

Collier walks the middle road and has a message for those on the global left and right. Paul Collier is no partisan. He is a rigorous minister of fact, research, and solutions. His message to those who stoke divisions is as strong and balanced as his work:

The left needs to move on from the West's self-flagellation and idealized notions of developing countries. Poverty is not romantic. The countries of the bottom billion are not there to pioneer experiments in socialism; they need to be helped along the already trodden path of building market economies. The international financial institutions are not part of the conspiracy against poor countries; they represent beleagured efforts to help. The left has to learn to love growth. (page 191)

Thr right needs to move on from the notion of aid as part of the problem—as welfare payments to scroungers and crooks. It has to disabuse itself of the belief that growth is something that is always there for the taking, if only societies would get themselves together. It has to face up to the fact that these countries are stuck, that competing with China and India is going to be difficult. (page 191)

I plan to add The Bottom Billion to my forthcoming international policy and development list. I highly recommend this book for anyone who plans to even dabble in the world of international development or altruism.

Pages taken from:
Collier, Paul. The Bottom Billion. New York: Oxford University Press, 2007. Hardcover.

As a bonus

NPR's Planet Money: Water issues in land-locked Lesotho

The Bottom Billion by Paul Collier is an excellent overview of the development issues faced by the poorest countries in the world.