The "bottom billion" - Paul Collier

TL;DR

Credible hope for the “bottom billion” requires compassion and enlightened self-interest backed by serious action on aid, trade, security, and governance. Paul Collier argues that commodity booms offer a transformational opportunity, noting that Angola alone receives $50 billion a year in oil revenue versus $34 billion in aid to 60 bottom-billion countries. Read on to see why governance determines whether this windfall produces lasting growth.

Transcript

so can we dare to be optimistic well the thesis of the bottom billion is that a billion people have been stuck living in economies that have been stagnant for 40 years and hence diverging from the rest of mankind and so the real question to pose is not can we be optimistic it's how can we give credible hope to that billion people that to my mind is... Read More

Key Insights

• 🤞 A billion people in stagnant economies require credible hope and a combination of compassion and enlightened self-interest.
• 🤑 Last time the rich world got serious about development, they employed aid, trade, security, and governance measures.
• 💥 Commodity booms present an opportunity for transformational development, but sustainable growth depends on good governance.
• 💪 The spread of democracy alone does not guarantee improved governance, as strong checks and balances are required.
• 🤩 International standards can be introduced to strengthen governance by outlining key decision points related to resource revenues.
• 🤟 Building an informed citizenry is crucial for ensuring politicians do not make empty gestures but enact meaningful change.

Questions & Answers

Q: What is the fundamental development challenge facing the bottom billion?

A billion people have lived in economies that remained stagnant for 40 years while diverging from the rest of humanity. Paul Collier says the central challenge is to give them credible hope through an alliance of compassion and enlightened self-interest.

Q: What does Paul Collier mean by compassion and enlightened self-interest?

Compassion recognizes the human tragedy of a billion people living without credible hope. Enlightened self-interest recognizes that another 40 years of economic divergence, combined with global social integration, would create a nightmare for future generations.

Q: What policies does Collier identify as necessary to help the bottom billion?

He identifies four broad areas: aid, trade, security, and governance. He argues that the rich world must approach them at least as seriously as America approached Europe’s development after World War II.

Q: What did America do to support post-war Europe’s development?

America provided Marshall aid, opened its markets to Europe, and helped institutionalize trade liberalization through the General Agreement on Tariffs and Trade. It also reversed its isolationist security policy, stationed 100,000 troops in Europe for more than 40 years, and supported institutions for mutual governance.

Q: Why do commodity booms offer hope for the bottom billion?

High commodity prices and new discoveries are sending unprecedented revenue into many bottom-billion countries. Collier cites new oil discoveries in Uganda and Ghana and a major iron ore development in Guinea as examples of this opportunity for transformational development.

Q: How large are commodity revenues compared with aid flows?

Collier says Angola alone receives $50 billion per year in oil revenue. By comparison, total aid to the 60 countries of the bottom billion in the previous year was $34 billion, showing that commodity revenues can dwarf aid.

Q: What happens after commodity export prices rise?

During the first five to seven years, countries receive more money as their terms of trade improve, output rises broadly, and GDP increases substantially. However, Collier’s review of countries over 40 years found that, 15 years later, most societies historically ended up worse off.

Q: How can governance of natural-resource revenues be strengthened?

Collier suggests voluntarily adopted international standards that define key decision points for managing resource revenues. The Extractive Industries Transparency Initiative is presented as a successful example, while an informed citizenry can press politicians to make meaningful changes rather than empty gestures.

Summary & Key Takeaways

• The bottom billion people have been stuck in stagnant economies for 40 years, requiring credible hope for development.

• Last time the rich world got serious about developing a region was after World War II, where aid, trade, security, and governance were key drivers.

• The commodity booms present an unprecedented opportunity for transformational development in the bottom billion, but good governance is crucial for sustainable growth.