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May 20, 2008

Helping the Bottom Billion Revisited

Last October, Paul Collier, an economics professor at Oxford University, wrote an article for the Washington Post following the annual meeting of the World Bank presided over by its president, Robert Zoellick ["Will the Bottom Billion Ever Catch Up?," 21 October 2007]. I posted a blog on the article at that time [Helping the Bottom Billion]. I recently re-read the article and found just as many insights reading it the second time as I did the first. As a result, I decided to comment on the article again with a little bit of a different focus. In the article, Collier defines the "new third world" and the challenges they present to the World Bank and others concerned with bringing the bottom billion of world's population out of poverty. Collier wrote:

"The Third World has shrunk, but it hasn't vanished. The new third world -- the hard core of the development challenge that Zoellick faces -- is composed of about 50 countries that are home to a billion people. Globalization is propelling China and India toward wealth, and both are closing in on the prosperous with unprecedented speed. But globalization is not working for the bottom billion. Their incomes have been virtually stagnant. From 1960 to 2000, the new third world experienced no growth at all. Meanwhile, the economies of the rest of the developing world have enjoyed accelerating growth, decade by decade. First gradually, then rapidly, the bottom billion have fallen away from the rest of mankind. Encouragingly, Zoellick has picked up on this."

Collier notes that Zoellick told the National Press Club in Washington, D.C., that the bottom billion should not be left behind. He finds that sentiment encouraging, but too late. The bottom billion, Collier laments, has already been left behind.

"During the golden decade of the 1990s, between the end of the Cold War and 9/11, the bottom billion's divergence from the middle 4 billion people on Earth accelerated to 5 percent a year, measured in per capita gross domestic product. By the millennium, the income gap between the average citizens of the bottom billion and those of the middle 4 billion was 5 to 1. And if you think that wealth gap is alarming, think about the lucky billion -- in Europe, North America, Japan, and elsewhere -- at the top."

It's bad enough, Collier insists, that the bottom billion have been left behind. In the information age, the even greater tragedy is that they know it. Collier insists that this is bound to cause problems.

"The further a billion people fall behind the rest of humankind, the more it will present the world of our children with unmanageable pressures. Even as the world's economies are bifurcating, the Earth continues to draw closer together socially through information and migration. So youth in the bottom billion know that they are being left behind. To catch up, they will need spectacular increases in growth."

In this case, connectivity is both a blessing and curse. The curse is that restless and hopeless youth are likely to cause trouble. But, if the world can find a way to connect the bottom billion so that they cooperate instead of fight, connectivity could prove to be a huge blessing. Collier paints the problem facing the bottom 50 countries in vivid terms.

"Most of the bottom billion live in Africa, but the countries at the bottom are scattered across the continents: places such as Haiti and Bolivia in Latin America, Yemen in the Middle East, many of the "stans" in Central Asia, and Laos and East Timor in East Asia. They are nearly all small, which is part of the problem. Countries with small and poor populations tend to lack the critical mass of educated and talented people to diagnose failure and do something about it. Globalization has compounded this shortage by making exits both feasible and attractive: The bottom billion are hemorrhaging their limited talent. Chinese students go back to China, Indian students now go back to India, but students from the countries of the bottom billion don't go back. Many of these small countries are also plagued by civil war."

The American essayist Thomas Paine wrote, "If we do not hang together, we shall surely hang separately." His contemporary, Benjamin Franklin, said something very similar. They, of course, were referring both to the colonial rebels in America and to the thirteen colonies from which they came. The countries containing the bottom billion have no way to "hang together" which is why they are dangling at the end of poverty's rope. Collier continues:

"Imagine if India or China were divided into 50 countries. Do you think they would all be at peace? To be small is also to be at the mercy of your neighbors, especially if you are landlocked. Suppose this country were not the United States but the Divided States, each sovereign and self-serving. The great manufacturing and agricultural heartland states would have been strangled at birth by the absence of interstate highways, railways and canals. The plight of Niger, which is dependent on Nigeria, and of Uganda, which is dependent on Kenya, is to be landlocked and located in the Divided States of Africa. A third of Africa's population lives in such countries."

Collier then provides his formula for helping these countries overcome the enormous challenges they face. His plan centers on finding ways to help them "hang together."

"In each country of the new third world, reformers are struggling with entrenched interests. Catching up depends on the reformers winning these struggles. We can't do that for them, but we can make their battles a whole lot easier than they have been. In 1945, the United States got serious about rebuilding Europe. Yes, there was aid, through the Marshall Plan. But there was also trade: Washington reversed the protectionism of the 1930s and created the General Agreement on Tariffs and Trade, thereby integrating Europe into the U.S. economy. And there was also security: Washington reversed the isolationism of the 1930s and created NATO, thereby stabilizing Europe by placing U.S. troops on European soil for decades. And there was also a shrewd attempt to create systems that produce good governance: Washington created the Organization for Economic Cooperation and Development and encouraged the formation of the European Economic Community, thereby starting the process of mutually setting standards that locked first Greece, Spain, and Portugal and then much of Eastern Europe into democratic market economies. It's feasible to get the bottom billion on a more prosperous track, but doing so will require a serious approach that utilizes all the instruments at our disposal -- and is sustained for at least two decades. Indeed, we will need the same toolkit we used in the recovery of postwar Europe: aid, trade, security and good governance, though utilized differently."

Collier has hit most of the hot buttons that I've addressed time and again in my discussions of Development-in-a-Box™: infrastructure, education, trade, good governance, standards, and security. All I would add to his list is health. Healthy populations are required to sustain development as well. Collier goes on to point out that some aid will be needed, but it is investment that really will help bring the bottom billion out of poverty.

"Aid will probably be more or less as important to helping the bottom billion as it was to saving postwar Europe: part of the solution but not decisive. The exclusive reliance on aid has distorted what should be institutions and energy devoted to development. Instead of development agencies, we have aid agencies. Instead of pressure from the street for development, we have pressure for aid. The distortion of institutions and citizen pressure is self-perpetuating because it crowds out consideration of other approaches. (What, for example, do you imagine aid agencies lobby for?) Our utter neglect of trade, security and governance policies for the bottom billion is a scandal -- and an opportunity. Properly used, these policies have real power, which is why they were employed for the recovery of Europe."

Collier concludes that in order to help the Third World hang together, the rest of the world must work together.

"Saving the bottom billion will also require the United States and Europe to work together. The emerging economies will need to do the same. To produce this unity of serious purpose, caring will not be enough: Goodness is in limited supply. Fortunately, it can be reinforced by the less morally demanding (and therefore better supplied) motivation of enlightened self-interest. ... In our democracies, politicians will ultimately do what we ask of them. It is our collective responsibility to grasp the challenge posed by the bottom billion -- and, critically, to get up to speed with the issues to understand what can be done about it. Only then will our politicians move from gestures to serious, effective actions."

As a result of my travels in the Middle East, I'm convinced of what Collier says. I believe he and I see things very similarly when it comes to helping he bottom billion. Hopefully, as Enterra Solutions' work in the Middle East matures, we can provide anecdotal evidence that "enlightened self-interest" is a powerful motivator for both those helping and those being helped.

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