Thursday, October 4, 2012

review of Paul Collier's "The Bottom Billion"

Paul Collier's The Bottom Billion is an excellent book-- a must-read for those interested in international poverty.

Collier opens by noting that international poverty used to be about 1 billion people in developed countries, in contrast to 4 billion in less-developed countries. (This terminology was an update from "1st world" and "3rd world".) Now, we have 5 billion people in developING countries and 1 billion in impoverished and stagnant countries "less-developed". The issue is not so much their lack of development, since poverty is not inherently a trap. (If it were, we'd all be poor, for all of history!) The larger issue is that they're stuck. 

Previous efforts have centered on "biz and buzz"-- the bureaucracy of professionals trying to help the poor in these (largely African) countries and the rock stars who get involved at various levels. Collier appreciates the good intentions and the herculean efforts-- although those are in concert with naivete and graft. But he says that we're missing it.

The biggest value-added: Collier discusses four "traps" and the data on their impact: 1.) "conflict": war and civil war; 2.) an abundance of natural resources; 3.) being land-locked (especially with bad neighbors); and 4.) bad government.

A little more detail on 1 and 2: "Conflict" has cause and effect with poverty-- and is connected to resources, as those in power (or those seeking power and wealth) use force to extract wealth from the country's resources. As such, an abundance of natural resources is a very mixed bag. They should be helpful, on paper-- but in practice, it often plays out as a curse rather than a blessing. (By analogy, think about individuals who are talented, beautiful, or really intelligent-- and how that often doesn't play out so well.)

Economists focus on #4 a lot and at least allude to #2. We certainly know about #1's importance, but it's largely outside our field. #3 was novel to me, but probably not to those with a little more expertise in the field.

Collier points to the inefficacy of foreign aid, at least of the traditional sort, in practice. (But he's not ready to give up on the possibility of it being effective!) And he notes the importance of economic growth, which typically benefits most people, including the poor.

His RX's: 1.) Target aid to the best governments or make it conditional on policy reforms. (This is harsh in a way, but sets the best incentives for improving. On paper, we can help dictators, but in practice, it won't work that way.) 2.) Give aid post-conflict, but not too soon: the data on "too soon" indicates that it promotes the re-establishment of conflict. 3.) Give aid to countries without as many resources. (For those with a lot of resources, that's not what they need!). 4.) Promote trade and access to coasts/ports. 5.) Finally, he even sees military intervention as an ethical and practical possibility (but overstates both-- as they would play out in practice!).

An easy read with a ton of great material on international poverty. If that's a topic of interest, you need this book!


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