#bottombillion

I picked The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It to be my introduction to understanding issues of global poverty and international development, and I think it was a really good introduction. It's written by Paul Collier, who is an Econ professor at Oxford University. He was formerly the Director of Development Research at the World Bank. 

Collier has three central propositions, "each unfortunately fairly novel," which lay out how he thinks the development community ought to change their thinking about global poverty.

1. We should be most concerned about the "bottom billion" people who are the poorest on the planet. Instead, most development efforts currently focus on the "middle income" five billion, mostly because they are easier to help than the bottom billion and because relatively few development professionals want to live/travel to the bottom billion countries, which are not safe or "glamorous" in development parlance. If we do not take action to lift the economic standards of the bottom billion now, the world will become an even more dangerous place where the bottom billion grow even more distant from the living standards of the top 6 billion. 

2. Within the societies of the bottom billion, there is an intense struggle between "heroes" and "villains." These are the brave people who are trying to achieve change and the powerful groups that oppose them. "The struggle for the future of the bottom billion is not a contest between an evil rich world and a noble poor world." Collier describes how the moral and political problems facing the reformers of the bottom billion are far more extreme than the moral, political problems facing reformers in relatively richer countries.

3. We need to utilize instruments that have not conventionally been part of the development armory: trade policies, security strategies, changes in in our laws, and new international charters.

This last proposition is obviously the meat of the book, which is the most complicated and technical parts to understand. To his credit, I think that Collier describes his ideas for these instruments fairly extensively, even though this book is not explicitly meant for development professionals or researchers. (Although I can see how this would be helpful reading for students in the development field.) 

Collier also describes four "traps" that keep a country in stagnation: 

1. conflict

2. natural resources (lack of natural resources is bad for obvious reasons, but actually being resource-rich is also dangerous because it leads to bad governance, conflicts and an economic situation called the Dutch Disease, which basically means that everything else in that country becomes relatively expensive in light of the capital surplus associated with the resource.)

3. being landlocked with bad neighbors. Being landlocked is bad enough (since it cuts off opportunities for coastal trade) but if you're stuck with bad neighbors, who are locked in war or likely to attack you, or are just as poor or poorer than you, so are no help in providing export infrastructure (you can't get your exports out if your neighboring countries don't have good infrastructure) then you are not likely to experience economic growth

4. being stuck in a small country with bad governance

Here are some other facts that I learned from this book that I think are important/shocking/thought-provoking:

Regional cost of a civil war is an estimated $64 billion. SIXTY FOUR BILLION. 

Cost of a state failure= $100 billion

73% of people in societies of the bottom billion have recently been through a civil war or are still in one

38% of private African wealth is held in foreign banks. Meaning, as much as foreigners are afraid to invest in Africa, Africans are also afraid of domestic investment. The perception of risk is actually self-perpetuating and not as bad as reality. 

Over the last 30 years, international aid has added an average of 1% to the annual growth rate in the bottom billion. This may not sound like much but the growth rate of the bottom billion over this period has been ZERO. With aid, this region can be described as experiencing economic stagnation. Without this aid, these regions would have experienced severe decline. (just as a benchmark, China's 2010 growth rate was estimated around 10.3%, and the estimated 2010 growth rate in the US was about 2.8%) This mean, obviously, that aid IS actually effective, even though it is not effective to the extent that we may want. Also aid has diminishing returns. When aid reaches about 16% of GDP it ceases to be effective. 

Rebellions are encouraged by natural resource wealth but not by aid, while coups are encouraged by aid. 

Aid is not very effective in inducing a turnaround in a failing state. 

About 11% of aid leaks into military spending, which the author found "surprisingly little." (says a lot about what expectations we're working with here.) "This is not negligible, but on the basis of this it would be grossly unfair to claim that aid is wasted. Nevertheless in those bottom billion societies that get a lot of aid, even 11% adds up to quite a lot of the military budget. We estimate that something around 40% of Africa's military spending is inadvertently financed by aid." (p103)

I could go on with this, but I think this gives a pretty good overview about what sort of information this book provides. The best function of Collier's information and research is to provide a pretty balanced cost/benefit analysis of controversial topics like aid efficacy, military intervention, trade policies, global capitalism, etc. He gives you the info with only a little bit of editorializing, and you make the decisions.