The Bottom Billion
by Paul Collier; copyright 2007 by Paul Collier,
published by Oxford University Press, ISBN: 978-0-19-531145-7
As Collier explains on page 1, of the 6 billion (now 7 billion) people living in the world about 1 billion live in industrially developed nations and the remainder live in ‘developing’ nations. Most of these nation’s economies are indeed growing and developing, some at quite astonishing rates. However, this only encompasses about 80% of the people living developing countries. The remaining 20%, about 1 billion people, are stuck in nations of immense poverty with no signs of growth or positive change around the corner. Every bottom billion country has one thing in common – they fit in to at least 1 of these 4 categories of development trap: the conflict trap, the natural resources trap, the landlocked with bad neighbors trap, and the bad governance trap. Collier asserts that development/foreign aid organizations need to be concentrating their efforts on these most dire cases, because these stagnation traps are almost impossible to break from the inside. Unfortunately, at present bottom billion countries are treated like lost causes; aid organizations try to avoid intervening because projects are more likely to fail, not to mention the huge danger posed by political instability to the employees on the ground.
An important question to ask is ‘Why should we bother intervening?’ and the answer is the same as it is for why we institute most public policies: for the benefit of our grandchildren. Decades from now those 80% of people in successfully developing nations will have mostly converged with rich society, but conditions in the bottom billion will only continue to deteriorate. Having large zones of economic blight in an otherwise prosperous global economy is begging for disaster. Recent financial crises have shown how failure in one area can ripple out and kneecap everyone. Besides economic considerations, zones of corrupt governance and extreme poverty are cesspools; breeding grounds for drug production, terrorists, and social ailments of all kinds. Furthermore, the longer we wait to intervene, the harder it will be to improve.
Focusing our aid efforts on those who need the most help is pretty intuitive, but the suggestions Collier makes on what should be done are not. This is because every conclusion he reaches is logically supported by mountains of peer-reviewed data. Throughout the book Collier uses statistical analysis, careful to avoid any possibility of reverse causality, to disprove common oversimplifications expounded by individuals from both the left and the right. Masterfully peeling the onion, Collier whittles away all misleading appearances, leaving only the complicated reality of the situation laid bare. Having successfully identified the problems, he convincingly explains how they can be solved; sadly, his solutions run completely counterintuitive to popular thought.
The conflict trap reflects the proneness of bottom billion societies to violent instability. “Seventy-three percent of people in the societies of the bottom billion have recently been through a civil war or are still in one.” Collier starts by deducing the reasons why civil war happens in the first place. He discovers, shockingly, that although rebel groups often cite their grievances as social concerns like political oppression, ethnic discrimination, and income inequality these problems have no correlation with proneness to civil war. These are just things rebel groups say to get support internationally; “A flagrant grievance is to a rebel movement what an image is to a business.”
So then what is the major reason? Simple material self-interest; likelihood of conflict increases dramatically in places with low income, slow growth, and dependence on primary commodity exports. With nothing else to lose greed takes hold and rebellions arise whenever there is an opportunity for rebel leaders to forcefully steal ownership of resources for themselves and their group, at the expense of everyone else. To illustrate,
“Rebel leader Laurent Kabila, marching across Zaire with his troops to seize the state, told a journalist that in Zaire, rebellion was easy: all you needed was $10,000 and a satellite phone. He went on to explain that in Zaire, everyone was so poor that for $10,000 you could hire yourself a small army. And the satellite phone? To strike deals with the resource extraction companies. By the time he reached Kinshasa he reportedly had arranged $500 million worth of deals. There have been several cases where international companies have advanced massive amounts of funding to rebel movements in return for resource concessions in the event of rebel victory.”
Since war is essentially reverse development, war in already low-income, low-growth areas only exacerbates the poverty, as well as creating a whole class of people who only know how to get by as killers for hire. How large is this effect in quantifiable terms? Collier works out a rough estimate of the economic costs of civil war on the global economy at $64 billion. This is not including the social cost on the first world in the form of epidemics triggered by disease prone refugees, terrorist attacks, and drug trafficking. “Ninety-five percent of the global production of hard drugs is from conflict countries.”
Assuming that we realize that it is in our best interest to help, what are Collier’s brilliant solutions? A combined policy of strategic military interventions aimed at extinguishing conflict, and an international (UN) charter for postconflict countries. Ignoring the political hurdles of getting Westerners interested in committing to military intervention in culturally obscure foreign nations after what happened with Iraq, Collier explains that genuine displays of force are necessary no matter how unpopular – though we are strong enough that they only need be meager:
“Later, when I met up with the diplomatic set, I asked why there were so many peacekeepers in [East Timor]. The answer I got about summed up the problems of foreign military intervention: because it was safe there. Governments that send soldiers to serve as UN peacekeepers are paid $1,000 per individual per month. For some countries that is not a bad way of getting some income from their armies. The imperative is then that soldiers should not get themselves killed, so safe environments such as East Timor are ideal, and risky environments such as the Democratic Republic of Congo are unattractive. Even if troops are sent to dangerous places, they often play it safe. A revealing case is the ragtag United Nations force in Sierra Leone. In 2000 the RUF rebel movement took five hundred of these soldiers hostage and stripped them of their military equipment. Was the RUF such a formidable fighting force? Hardly – once a few hundred British troops arrived a few months later, willing to take casualties, the whole rebel army rapidly collapsed. The UN troops were an easy target because the RUF understood that they would not resist. They were carrying their guns like tourists flaunting their jewelry.”
Political systems are most fluid right after conflicts; countries can rapidly shift anywhere from (relatively) disastrous to prosperous depending on policy decisions. Postconflict situations are still tumultuous and governments need extra security while recovering – defense budgets always stay high after the war, a strategy which usually backfires big time. Additionally, reformers are often unsure exactly how to achieve their ideals and desperately need a template for guidance. These reasons combined is why Collier recommends that the UN outline a charter for postconflict situations based on what has proven successful previously,
“A postconflict charter should include guidance on behavior by donors and the international security regime. Donors should be committed for the decade, and not just the first couple of high-glamour years. International security forces should likewise be committed for the long haul. In return, postconflict governments should reduce their own military spending – as we have seen, it is dysfunctional. They should have a transparent budgetary process, so that public power does not translate into private profit. They should include opposition groups in power, for example through decentralization. And they should sort out conflicting and confused property claims quickly.”
Natural Resources & Bad Governance Traps
The natural resource trap is another counterintuitive idea. How does having an abundance of primary commodities (wealth) trap a country in poverty? The culprit is an array of factors: Market boom and bust cycles combined with general underinvestment in profitable projects, exacerbated by corrupt and/or inefficient governments and a phenomenon called ‘Dutch disease’ – natural resources revenues crowd out all other potential export activities like manufacturing, incinerating any possible opportunities for growth. Not to mention governments tend to act irrationally during the boom times;
“During a price boom government ministries, scenting the money available, put in outrageous bids for more spending. In Kenya one ministry raised its proposed budget thirteenfold and refused to prioritize. Probably it reckoned that other ministries were likely to do the same, so behaving responsibly was likely to leave it at the back of the line.”
This relates to yet another unexpected trend – in bottom-billion resource rich countries, autocracies outperform democracies. This ties in to our unit 4 discussion about capitalists preferring to deal with totalitarian systems. Indeed, it is easier for the corporation to strike a deal with just a couple of guys, bribe them handsomely and still fandangle a fantastic bargain out of the deal. But if this is so, if capital really pays less for resources from autocracies, how can they outperform democracies? In democratic systems politicians are too focused on recouping campaign finance out of the public coffers to bother reinvesting resource revenues in to productive development; autocracies reinvest adequately.
“An abundance of resource [revenues] alters how electoral competition is conducted. Essentially, it lets in the politics of patronage. Electoral competition forces political parties to attract votes in the most cost-effective manner. In normal circumstances this is done by delivering public services such as infrastructure and security more effectively than rivals can. The extreme alternative to public service politics is the politics of patronage: voters are bribed with public money.”
I’m sure we can all agree, not all democracies are alike. But what is the only thing absolutely necessary to be considered democratic? ‘Free’ elections. This makes sense, elections are a big public spectacle which the media can report on extensively, so essentially elections = democracy. As it turns out, having a system with elections but no checks and balances creates a very lopsided democracy. Lopsidedness is the situation in most of the bottom-billion. Adding checks and balances to the system reduces illegitimate uses of power and makes patronage politics infeasible, allowing democracies to function more efficiently than autocracies. To roughly quantify the magnitude of this effect, Collier uses a scale with 17 unique checks and balances. On average, it only takes a mere 4 of the 17 restrictions for democracies to pull ahead. Every additional restraint after that widens the performance gap.
Collier makes the point that removing the possibility of patronage politics disadvantages the entire political class, so periodic reform attempts always face strongly entrenched opposition. Similarly to postconflict situations, reformers often have no clear idea what reforms have previously proven successful, so Collier recommends more international charters to act as guidelines. First is the charter on resource revenues, which provides guidelines for every step of the resource extraction process, because there are many opportunities for corruption along the chain of events: 1st step is transparent auctions. 2nd is changing contract terms so that price risks created by boom and bust cycles should be carried by the financially sophisticated corporation, not the ill-equipped national government. The 3rd step is transparent payment of revenues, so the population can see how much money is coming in. 4th is transparency in public expenditure, so the population can see how much money is going out. Finally there should be some stipulations for smoothing out public spending during resource shocks.
As you can see, transparency is the most critical element for extinguishing corruption. But no corrupted government will willingly allow anyone to shine a light on them, so Collier requires a tandem charter for democracy which outlines standards to protect the corruption protections, checks and balances. How do we know which of the 17 checks and balances actually make the biggest difference and therefore require the most stringent protection? Collier delivers a great answer in this example from Peru:
“The government of Alberto Fujimori was notably corrupt, so much that the chief of the secret police, Vladimiro Montesinos, who was charged with the task of implementing all the corruption, decided to keep careful records. These records now provide a rare quantitative window on political corruption, and John McMillan of Stanford Business School has analyzed them. His work shows that the Fujimori government set out to systematically undermine each check and balance that restrained it. It bribed members of parliament, judges, newspaper editors, and the staff of radio stations and television stations. If there was a restraint, the government undermined it. The amount it was prepared to pay reflected its view of the importance of each restraint. From our perspective it is not just creepily fascinating to see a system of bad governance on display; it also tells us what is really important in the fight against it. Where the Fujimori regime put most of its money is probably where we should be the most vigilant. While the official constitutional restraints were bought, the regime did not spend serious money undermining them. The newspapers were also bought, but it was the same story: thousands of dollars a month, not millions. Where the zeros rolled on the checks was to buy the television stations. There were ten stations, and the government bought them at nearly a million dollars each per month. This money bought a proper contract – each day the station had to screen its evening news program in advance for Montesinos and make the required changes. So for the government it was the television news that was the vital restraint to control. Was this paranoia? No, it turns out that the government was quite right. We know because the government had only bothered to buy the nine biggest television channels – it decided not to bother with the tenth, a tiny financial satellite service with only ten thousand subscribers. This is how the government fell. Someone leaked a video of Montesinos bribing a judge, and it was broadcast on this one television channel. Protest escalated uncontrollably.”
The final necessary measure needs to come from the WTO, not the UN. The World Trade Organization was created as a bargaining table for reduction of trade barriers. Apparently this has worked great between developed nations, but not at all for the bottom billion. Bottom billion countries have nothing to offer for leverage in the negotiations, so the western attitude of ‘maximize concessions abroad in exchange for minimum concessions on our end’ really screws them over. Bottom billion countries need duty-free markets for manufactured goods for them to have any chance of overcoming Dutch disease and breaking their dependence on primary commodity exports. To achieve this Collier recommends that the WTO institute a ‘gift’ round before every proper round of bargaining, wherein developed nations reduce their trade barriers to bottom billion nations as charity. His thinking is that orchestrating unreciprocated trade reductions through the WTO will cause developed nations to pressure each other to stay in-step with each other’s charitable concessions, putting no developed nation at a disadvantage.
Where Collier Falls Short
There is a point in the book where Collier describes how consumer pressure has forced oil companies in to being slightly more environmentally conscious over the years. In particular he discusses how consumers have successfully boycotted companies who refuse to spend the money to decommission old oil wells properly. He goes on to say that such issues no do not matter to the bottom billion and that consumer pressure should be put to something less peripheral. I could not believe he had the gall to say environmental protection was irrelevant, least of all in a book entirely devoted to mitigating future disasters before it is too late! Environmental issues are relevant for everyone, especially economies looking to industrialize. The particular issue Collier discussed, shutting down old oil wells safely, is of utmost importance to the local areas which contain oil, lest they pollute their precious few sources of drinking water. Meaning that issue which Collier so flippantly dismissed is actually critical for much of the Bottom Billion.
His lack of comprehension of important environmental concepts runs deep. In a world where scientists agree that the industrial activities of the richest 10% alone have already brought us to the brink of another mass extinction, Collier imagines that we can safely continue business as usual all while the other 90% aspire towards our prolific level of consumption. That is not only mathematically impossible, it is downright suicidal. After all, the path of technological advancement we trailblazed and are now bequeathing the developing world is exponentially inefficient; a recent NASA funded study confirms:
“’Technological change can raise the efficiency of resource use, but it also tends to raise both per capita resource consumption and the scale of resource extraction, so that, absent policy effects, the increases in consumption often compensate for the increased efficiency of resource use.’ Productivity increases in agriculture and industry over the last two centuries has come from ‘increased (rather than decreased) resource throughput,’ despite dramatic efficiency gains over the same period.”
Collier insists that it is critical for bottom billion countries to industrialize for the sake of rapid economic growth; meanwhile, common sense dictates that industrialization incorporate sustainability lest it exceed the planet’s carrying capacity annihilating itself and possibly our species. A major part of the increase in resource throughput problem discussed above is an over-reliance upon large scale extraction of nonrenewable resources like oil and perhaps more importantly metal. Why not tackle all three problems with the same solution – hemp? Hemp is the number one contender for sustainable replacement material for common purposes. It can be grown almost anywhere and is usable to make construction materials like plastic, fiberboard, and concrete, as well as clothing, paper & cardboard, rope, biofuel, paint, varnish, food, and much more. Henry Ford designed a car with a hemp composite frame more resilient than steel that ran on hemp ethanol. As a bonus effect, hemp is a carbon sink, removing CO2 from the atmosphere. Hemp seems perfectly suited for bottom billion countries; they want to industrialize, but they can’t compete within established markets. So why not build a brand new industry in this incredibly versatile untapped market? Besides, would it not be easier to build a hemp industry from scratch in a place with plentiful cheap labor and nothing else to lose than to initially try to retrofit industrial production of highly developed nations whose capitalists have everything to lose?
For someone who so masterfully dissects the nuances of how economics and politics interrelate in developing nations, Collier is surprisingly ignorant about how the same subject shakes out back home. I suppose he has to be; everyone has a blind spot, and if he paid attention to massive roadblocks present in reforming our system before it collapses he might not be optimistic enough to do the hard work of deducing detailed, viable solutions for foreign development. Regardless, his unique blindness leads his (still high quality) solutions to merely be a blueprint of what should be done, with zero guidance on how to do it. Oh well, one man can only do so much. But it goes to show why Collier has made no measurable progress in the 7 years since he wrote this book; he definitely failed to get his policy ideas discussed in the main stream public. I know I never heard of the man or his well-reasoned ideas before going out of my way to take this class.
Let’s get real with what Collier is asking for here – he wants multinational corporations to willingly surrender some of their profits and shares of the market so the rest of the world can develop. What he does not acknowledge is that the corporate system is designed so that their only job is to maximize profit; they would feel excruciatingly punished for doing otherwise, not something they are eager to volunteer for. When Collier advocates that we use government bodies to execute these charters, he fails to acknowledge that the power to influence economic policy has been bought by the corporations and no longer rests within government control in any way but appearances. When Collier in turn blames the general population for their own delusional ignorance and for the lack of political pressure put on real issues, he does not acknowledge that mainstream media as well as the power to construct public educational policy have been bought by corporations as well. With most information sources filtered through the corporate looking glass it is no great wonder that the public is largely ignorant, placated, and distracted, nor can you rightly blame them. Modern America has the same problem as Fujimori’s Peru: plutocrats have undermined our checks and balances in order to become even more wealthy and powerful. The only difference between our situation and that of developing countries is that their corruption is still crude and heavy-handed, whereas corruption in America is more sophisticated, subtle, and systemic. Corporate monopolies are concealed by the free market illusion and our freedom of choice; the wide variety of producers available for the consumer to choose from are ever increasingly being bought up in to singular power structures. No one remembers that their freedom of choice is limited by whoever chooses or restricts what choices are available.One must wonder, who are we to tell the bottom billion nations they must redress their corruption when we have yet to do the same?
Overall The Bottom Billion was a stimulating read. Collier’s work disproved some common fallacies of left leaning thought, which I am happy to abandon. I have come around to agree with his stance that military interventions can be prudent to prevent unnecessary suffering; the success of British Operation Palliser in Sierra Leone impressed me. Still, I have my doubts that our present government ever has any genuine altruistic intentions about strategic intervention, which Collier’s stance takes as a given. And I believe his charters really would greatly assist development in Bottom Billion countries, so the man’s life work is not a waste, though I will be greatly surprised if he lives to see them enacted.
All quotes are from The Bottom Billion except for the last one, which is hyperlinked to its source.