Bono and the Bottom Billion

October 29, 2007 Topic: Economics

Bono and the Bottom Billion

With Africa filling the pages as the celebrity pet cause, Paul Collier takes a hard look at what’s really going on.

Paul Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It (New York: Oxford University Press, 2007), 224 pp., $28.00.

Fifty years ago this year, delegations from fifty-six countries arrived in Accra to witness the independence of the British crown colony of the Gold Coast as the new state of Ghana, the firstborn of what would soon be a veritable wave of nearly four dozen Sub-Saharan African nations which would achieve political independence in the coming years. The Duchess of Kent represented her niece, Queen Elizabeth II, while Vice President Richard Nixon stood in for President Dwight Eisenhower who broadcasted a special radio message to the Ghanaians on the birth date of their new country expressing his "particular admiration [for] the manner in which you attained your independence" and emphasizing that he spoke "for a people that cherishes independence, which we deeply believe is the right of all people who are able to discharge its responsibilities."

On March 6, 1957, few doubted that Ghana and the states which would follow in its wake would be able to discharge the responsibilities they assumed on taking their place among the world's sovereigns. As historian Martin Meredith has noted in his monumental history of post-colonial Africa, rarely are states launched with as much promise as the West African country:

Ghana embarked on independence as one of the richest tropical countries in the world, with an efficient civil service, an impartial judiciary and a prosperous middle class. Its parliament was well established, with able politicians in both government and opposition. The prime minister, himself, then only forty-seven years old, was regarded as a leader of outstanding ability, popularly elected, with six years of experience running a government. The country's economic prospects were equally propitious. Not only was Ghana the world's leading producer of cocoa, with huge foreign currency reserves built up during the 1950s cocoa boom, but it possessed gold, timber and bauxite.

Were one to have examined Ghana's economic indicators in comparison with those of, say, South Korea, the African nation evinced better prospects hands down. While the departing British governor, Sir Charles Arden-Clarke, bequeathed Ghana's Kwame Nkrumah an unprecedented $481 million in foreign reserves, South Korea's Syngman Rhee was presiding over a nearly bankrupt country eking out an existence on U.S. aid having not only endured the thirty-five years of brutal Japanese occupation, but subsequently suffered a devastating conventional war fought in its cities and countryside which concluded in a stalemate and armistice just four years earlier. In both aggregate and per capita terms, the gross domestic product of the Republic of Korea was lower than that of Ghana in 1957. Yet half a century later, South Korea boasts the world's 13th largest economy and is considered "highly developed," ranking 26th on the Human Development Index of the United Nations Development Programme (UNDP), while Ghana barely made the cut to qualify as a "medium developed" nation, ranking 136th out of 177 countries surveyed. And even with its underwhelming economic performance, Ghana is far from the worst off among African nations

Why?

Paul Collier, director of the Center for the Study of African Economies at Oxford University, author of The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, tries to provide an answer.

Collier's subtitle points to the object of his interest, the combined population of fifty-eight countries, most of whom are African, characterized by both low per capita incomes and lack of growth over the long term. His argument is that while for decades the question of development has been posed as one of "a rich world of one billion  people facing a poor world of five billion people," that conceptualization is now outdated because "most of the five billion, about 80 percent, live in countries that are indeed developing, often at amazing speed." In contrast, the ones who are falling behind and, Collier adds, "often falling apart"-for want of a convenient geographic label, he refers to the group as "Africa+," with the plus-sign referring to "places such as Haiti, Bolivia, the Central Asian countries, Laos, Cambodia, Yemen, Burma and North Korea"-require immediate attention because "as the bottom billion diverges from an increasingly sophisticated world economy, integration will become harder, not easier." Like many developing countries, the "Africa+" countries are poor. What distinguishes them is that they caught in one or more of four "traps."

The first trap is conflict, either in the form of civil war or coup d'état-or both in succession. Collier points out the nearly three quarters of the population of "Africa+" are either embroiled in a civil war or just getting over one. Turning around the work of those who study conflict as an impediment to growth, Collier proposes that differences in growth helped explain propensity to war: halving the starting income of a country doubles the risk of civil war. Furthermore, Collier found that not only did a typical low-income country faced a 14 percent risk of civil war in any five-year period, but each percentage point added to its growth rate decreased a percentage point from this risk, while each point knocked off the growth rate increased the risk by a point. Worse, if a civil war actually breaks out, it tends to reduce growth by around 2.3 percent per year, so that a "typical" seven-year conflict leaves the country affected about 15 percent poorer than it would have otherwise been. And once there is one civil war, there is a good chance another will follow in its wake: "Half of all civil wars are postconflict relapses," Collier observes. Take all these mathematical expectations together and one is forced to conclude that the future for a place like the rather ironically named Democratic Republic of Congo (formerly Zaire, formerly the Belgian Congo, formerly Leopold II's Congo Free State) is likely indeed to be as dismal as implied in the title of Joseph Conrad's Heart of Darkness. At its present rate of growth, the country will need at least half a century of peace just to get its income back to pre-independence levels. However, as Collier puts its rather clinically: "Its chances of getting fifty continuous years of peace with its low income, slow growth, dependence upon primary commodities, and history of conflict are, unfortunately, not high. This country is likely to be stuck in a conflict trap no matter how many times it rebrands itself."

Collier's second trap is the paradox of discovering valuable natural resources while poor. Rather than being a catalyst for development, the windfall might actually reduce economic growth and, in the end, leave the country poorer since the growth foregone may be greater the income from exports-and this even before one factors in the general volatility of the commodity markets on which resource-rich economies depend. In Nigeria, for example, the meteoric rise of the petroleum industry in the 1970s coincided with the equally spectacular collapse of the country's previously significant agricultural sector. As a result, the masses, which tend to be rural cultivators, end up being the first impoverished by the sudden increase in national wealth. According to Collier, the "resource curse" affects about one-third of the bottom billion.

The third trap is an illustration of why geography matters, to recall the title of Harm de Blij's recent volume. While being landlocked is no obstacle to prosperity-just ask the Swiss, Austrians, or Luxembourgers-it is not insignificant that nearly 40 percent of the people in the countries of "Africa+" reside in landlocked nations. Collier argues, "If you are landlocked with poor transportation links to the coast that are beyond your control, it is very difficult to integrate into global markets for any product that requires a lot of transport, so forget manufacturing-which to date has been the most reliable driver of rapid development." And neighbors are not just transport corridors to markets, but are themselves markets for countries in the interior. So the Swiss are surrounded by potential markets in Germany, Austria, Italy, and France, while the Ugandans are forced to make do with Kenya (stagnant for three decades), Tanzania (used twice in the last two decades as a staging area to invade Uganda), Rwanda (recovering from a genocide), the Democratic Republic of Congo (see above), and Sudan (in the midst of a campaign of genocidal violence in Darfur with a renewed civil war brewing in South Sudan).

If countries have little say as to their resource and geographical endowments, they certainly are responsible for their economic and governance policies which directly shape economic performance. And some three-quarters of the populations of "Africa+" have been subjected to a prolonged period of bad governance and poor economic policies. In a direct rebuke to Jeffrey Sachs, who recently took to the pages of a special Africa-focused issue of Vanity Fair-guest edited by Bono, no less-to brush off arguments about poor governance and corruption as a "convenient excuse to do nothing," Collier asserts that bad governance is indeed a trap since "terrible governance and policies can destroy an economy with alarming speed," adducing as his first exhibit President Robert Mugabe who "must take responsibility for the economic collapse in Zimbabwe since 1998, culminating in inflation of over 1,000 percent a year" (since The Bottom Billion went to press, the country's official annual inflation rate has soared above 7,600).