Nial Ferguson reviews a Paul Collier book on global poverty:
It is perhaps a sign of how far sub-Saharan Africa still has to go that the most vigorous — and certainly the best publicized — debate about its economic future in recent years has been between two American economists based in New York. On one side of the argument is Jeffrey D. Sachs, the director of the Earth Institute at Columbia University and the author of “The End of Poverty.” On the other is William Easterly of New York University, whose ironically titled “White Man’s Burden” lampoons Sachs as a modern version of a 19th-century utopian.
Now comes another white man, ready to shoulder the burden of saving Africa: Paul Collier, the director of the Center for the Study of African Economies at Oxford University. A former World Bank economist like Easterly, Collier shares his onetime colleague’s aversion to what he calls the “headless heart” syndrome — meaning the tendency of people in rich countries to approach Africa’s problems with more emotion than empirical evidence. It was Collier who pointed out that nearly two-fifths of Africa’s private wealth is held abroad, much of it in Swiss bank accounts. It was he who exposed the British charity Christian Aid for commissioning dubious Marxist research on free trade. And it was he who pioneered a new and unsentimental approach to the study of civil wars, demonstrating that most rebels in sub-Saharan Africa are not heroic freedom fighters but self-interested brigands.
Collier is certainly much closer to Easterly on the question of aid. (He cites a recent survey that tracked money released by the Chad Ministry of Finance to help rural health clinics. Less than 1 percent reached the clinics.) Yet “The Bottom Billion” proves to be a far more constructive work than “The White Man’s Burden.” Like Sachs, Collier believes rich countries really can do something for Africa. But it involves more — much more — than handouts.
Let be skip to the descriptive bits:
Collier’s is a better book than either Sachs’s or Easterly’s for two reasons. First, its analysis of the causes of poverty is more convincing. Second, its remedies are more plausible.
There are, he suggests, four traps into which really poor countries tend to fall. The first is civil war. Nearly three-quarters of the people in the bottom billion, Collier points out, have recently been through, or are still in the midst of, a civil war. Such wars usually drag on for years and have economically disastrous consequences.
Why, aside from their poverty, have so many sub-Saharan countries become mired in internal conflict? Collier has spent years trying to answer this question, and his conclusions are central to this book. Civil war, it turns out, has nothing much to do with the legacy of colonialism, or income inequality, or the political repression of minorities. Three things turn out to increase the risk of conflict: a relatively high proportion of young, uneducated men; an imbalance between ethnic groups, with one tending to outnumber the rest; and a supply of natural resources like diamonds or oil, which simultaneously encourages and helps to finance rebellion.
It was in fact Collier who first came up with the line “diamonds are a guerrilla’s best friend,” and a substantial part of this book concerns itself with what economists like to call the “resource curse,” his No. 2 trap. As he sees it, the real problem about being a poor country with mineral wealth, like Nigeria, is that “resource rents make democracy malfunction”; they give rise to “a new law of the jungle of electoral competition ... the survival of the fattest.” Resource-rich countries don’t need to levy taxes, so there is little pressure for government accountability, and hence fewer checks and balances.
That is an interesting reversal of "no taxation without representation".
Countries don’t get to choose their resource endowment, of course; nor do they get to choose their location. Trap No. 3 is that landlocked countries are economically handicapped, because they are dependent on their neighbors’ transportation systems if they want to trade. Yet this is a minor handicap compared with Trap No. 4: bad governance. Collier has no time for those who still seek to blame Africa’s problems on European imperialists. As he puts it bluntly: “President Robert Mugabe must take responsibility for the economic collapse in Zimbabwe since 1998, culminating in inflation of over 1,000 percent a year.”
So what to do?
If these four things are the main causes of extreme poverty in Africa and elsewhere, what can the rich countries do? Clearly we can’t relocate Chad or rid Nigeria of its oil fields. Nor, Collier argues, can we rely on our standard remedies of aid or trade, without significant modifications.
...Trade, too, is not a sufficient answer. The problem is that Asia has eaten Africa’s lunch when it comes to exploiting low wage costs. Once manufacturing activity started to relocate to Asia, African economies simply got left behind. Now, to stand any chance of survival, African manufacturers need some temporary protection from Asian competition. So long as rich countries retain tariffs to shelter their own manufacturers from cut-price Asian imports, they should exempt products from bottom billion countries.
This, however, is not the most heretical of Collier’s prescriptions. Reflecting on the tendency of postconflict countries to lapse back into civil war, he argues trenchantly for occasional foreign interventions in failed states. What postconflict countries need, he says, is 10 years of peace enforced by an external military force. If that means infringing national sovereignty, so be it.
Still, it would be wrong to portray Collier as a proponent of gunboat development. In the end, he pins more hope on the growth of international law than on global policing. Perhaps the best help we can offer the bottom billion, he suggests, comes in the form of laws and charters: laws requiring Western banks to report deposits by kleptocrats, for example, or charters to regulate the exploitation of natural resources, to uphold media freedom and to prevent fiscal fraud. We may not be able to force corrupt governments to sign such conventions. But simply by creating them we give reformers in Africa some extra leverage.
The Helsinki Accord comes to mind in that regard.