The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It (Grove Art)

by Paul Collier

in the context of ethnic loyalties and the absence of press freedom, patronage politics is more cost-effective than the provision of public services as a strategy for winning elections.

To finance patronage the government first needs to embezzle public money out of the budget and into slush funds.

for the societies where patronage is feasible,

democratic politics then tends to attract crooks rather than altruists.

Why do big resource revenues weaken political restraints? One reason is obvious: they radically reduce the need to tax. Because resource-rich countries do not need to tax, they do not provoke citizens into supplying the public good of scrutiny over how their taxes are being spent.

Political scientists have developed a quantitative measure of political restraints on power.

adds up how many of seventeen possible checks and balances are incorporated into a political system—

a free press was quite generally associated with a faster growth rate, but that the effect was significantly larger in the context of resource riches.

The more diverse the society, the smaller the autocrat’s group is likely to be.

The resource-rich, ethnically diverse societies need a democracy that is distinctive in having a strong emphasis on political restraints

An example is Botswana,

The sort of democracy that the resource-rich societies of the bottom billion are likely to get is itself dysfunctional for economic development.

Landlocked with Bad Neighbors

percent of the people living in bottom-billion societies are in countries that are landlocked—

All landlocked countries are by definition surrounded by neighbors. Unfortunately, some neighbors are better as markets than others.

The global average was that if a country’s neighbors grew by an additional 1 percent, the country grew at an additional 0.4 percent.

Around 30 percent of Africa’s population lives in landlocked, resource-scarce countries.

Philippines, where training is targeted to the needs of high-income economies and the government provides information and embassy services to make hiring of its citizens easy.

In 2006 the vice president of China toured Africa with the revealing refrain “We won’t ask questions.”

constraint upon rural development is the subsidies that are paid to farmers in Europe, Japan, and the United States.

reform is not just a matter of political will. It is also a technical matter, and in the bottom billion there is a chronic shortage of people with the requisite knowledge. Few citizens get the training needed, and those who do get it leave.

Starting from being a failing state, a country was more likely to achieve a sustained turnaround the larger its population, the greater the proportion of its population that had secondary education, and—perhaps more surprisingly—if it had recently emerged from civil war.

countries need a critical mass of educated people in order to work out and implement a reform strategy.

the probability of a sustained turnaround starting in any year is very low: a mere 1.6 percent.

We estimated that the cost of a single failing state over its entire history of failure, to itself and its neighbors, is around $100 billion.

The best-studied example of convergence is the European Union.

Convergence is also working on a global scale:

although globalization has powered the majority of developing countries toward prosperity, it is now making things harder for these latecomers.

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the most dramatic transformation of the size and composition of trade has been during the past twenty-five years.

Until around 1980 developing countries’ role was to export raw materials. Now, 80 percent of developing countries’ exports are manufactures,

In the 1960s and 1970s the rich world dominated global manufacturing despite having wages that were around forty times as high as those in the developing world.

there are spatial economies of scale in manufacturing.

The professional term for this is “economies of agglomeration.”

once activity started to relocate, agglomerations grew in low-wage Asia. In the process, wages are being driven up in Asia,

In effect, in order to break into global markets for manufactures it is necessary to get over a threshold of cost-competitiveness.

the bottom billion will have to wait a long time until development in Asia creates a wage gap with the bottom billion

When Zimbabwe’s Robert Mugabe was looking for money to bail himself out of the ruinous consequences of his political choices, he came up with the “look east” strategy. East did not mean Russia, it meant China.

Public capital can supply much of the infrastructure that these societies need, but it cannot begin to supply the equipment that workers need in order to be productive; that can be supplied only by private investors.

The problem for the reforming countries of the bottom billion is that the risk ratings take a long time to reflect turnarounds.

by the end of military rule in Nigeria in 1998 Nigerians were holding around $100 billion of capital outside the country.

Africa: By 1990, 38 percent of its private wealth was held abroad.

the most capital-scarce region in the world exported its capital.

having already hemorrhaged capital, the countries at the bottom will increasingly hemorrhage educated labor—

The societies of the bottom billion can only be rescued from within. In every society of the bottom billion there are people working for change, but usually they are defeated by the powerful internal forces stacked against them. We should be helping the heroes.

Aid does tend to speed up the growth process. A reasonable estimate is that over the last thirty years it has added around one percentage point to the annual growth rate of the bottom billion.

The statistical evidence generally suggests that aid is subject to what is called “diminishing returns.”