Book Report: Paul Collier's The Bottom Billion / by Simmon Li

Well, I think it's easiest for me to condense the book into what the essence of his argument is. It was a very fantastic read, I don't think I've ever finished a book in 2 days, so I'm impressed. This book is amazing. I know it's just a book about international development, and so it's probably boring as fuck to the majority of people that will read this, but I couldn't put it down. I really couldn't. Going through the contents of the book really gives you a strong overview of his arguments. He describes how the world's different nations stand in relation to each other, and how there is a disproportionately large amount of people that are not prosperous like the global North. His main plight, however, is for the "bottom billion" for which the book is named. He concerns himself primarily with their struggle, and writes a pretty strong analysis of the situation, and at the end of the book, he goes into what he thinks can help.

The main plight of the countries is that they lack economic stability and/or growth. Collier then postulates, using statistical evidence, why these nations lack sustained growth. He categorizes situations into a generic set of 4 traps. The conflict trap, the natural resource trap, landlocked with bad neighbours, and finally, bad governance in small economies.

The conflict trap

He basically talks about how states often find themselves in conflict, whether it's a civil war, or a military coup. He discusses the conditions which favour conflict and contrasts it with conditions that can lead to a coup. Of course, risk of relapse into conflict is a large part of the cycle. Anyway, it's fairly interesting. Of course during civil conflict, or coups, economic growth is hindered. That's to say nothing of the perceived risk to the long term stability, which again affects the economy. He takes a look at some of the reasons civil wars end,

The natural resource trap

This trap I don't quite understand as clearly. It's more intrinsically economic, and so I had a little bit of trouble wading through the terms. He uses the term "dutch disease" quite a bit, and it basically is the process by which dependence of natural resource revenues discourages diversification of other production/exports. So, while the oil is flowing, things are fine (especially consider the power of oil as a commodity, he argues that while the oil flows, the government can fuck up royally and still get by). Of course, as we all have experienced, the price of commodities is pretty wild. This is one of the reasons why natural resource wealth is not something that can be a reliable engine of economic growth: price volatility. Another reason why natural resources can doom a country to poverty is "resource rents". This one is beyond me, it has to do with the surplus of profit over cost, I think. (yes, I looked it up in the book). Basically, with the resource rents (or net profit), there is a fairly easy way for the government to make money. The problem, as I understand, is that this type of revenue (regardless of the two reasons mentioned above), generally favor an autocratic society. Collier states that democracy breaks down in this way because the rents give a way for the government in power to buy votes, in a very peculiar way. Politicians in Canada, the US, etc, all buy votes. The difference is that in a stable democracy, the way government buys votes is by providing tax breaks, perhaps giving the citizens social programs, etc. In a poor, resource-rich country where resource rents (profit after costs) are an easy way to make money, the government suddenly has a lot of money to bribe people with (patronage politics). Additionally, Collier proposes that with the rents, governments don't need to tax as much, which leads to a lack of scrutiny as to how tax dollars are spent.

Under those conditions, money is often mis-used, and is never really spent wisely, and that is why resource-richness can be a trap.

Landlocked with bad neighbours

This one is fairly straight forward. Without access to water trade, countries are stuck. They have to rely on e-trade, air trade, or trading by haulage. Many of the lower-income countries have poor infrastructure, which leads to increased costs when exporting goods. Basically, if your neighbour doesn't maintain/invest in infrastructure, you're slightly screwed. Also, conflicts can sometimes spread, and the like. He also mentions that neighbours can serve as local markets for your export. If your neighbours are also low-income, you're forced to export further, and that falls back onto the first point. For example, Canada trades with the US quite a bit, without the US, there's probably not a way we could have grown with them. Neighbours do matter.

Bad Governance

This one is straight forward. Lack of political stability, and strong policy that's friendly to business will not make for a desirable investment profile. Risk (perceived or otherwise) hinder investment in these lower-income countries, and it takes a while for improvements (whether they're policy changes, or political stability changes) to manifest themselves in foreign investment. I believe he lumps capital flight in this section of the book too. Basically, capital flight is when people hold their money outside of the country for fear that it would not be as strong otherwise. Swiss bank accounts, and all that biz.

He talks a bit about globalization, and how Asia really screwed these "bottom billion" countries by basically beating them to the punch.

He then talks about specific tools that we have as richer nations that can help to assist these countries and help to get them on their way. They're all pretty straight forward, and I don't think they need explaining as much as the traps do. Of course, foreign aid for development is a key tool we have, and he also lists military intervention, laws & charters, and finally how we can use trade policy to help these nations along the way.

It was a great read. I'm pretty impressed about how through and thought out this book was. I don't read very often, so you know, I'm impressed. The one thing that I really liked about the book was that it wasn't very politically charged. It was just this guy's opinion on what was wrong, and what needed to happen. I have a feeling he's a little left leaning, but you know, I think that's a general bias for any sane person (can you tell which way I lean? haha). Anyway, a fantastic read. I plan on starting Jeffery Sach's The End of Poverty tomorrow. Hopefully I can write a pseudo-report on that one too, I know Collier referenced some of Sach's ideas in this book, so I kind of wish I read them in reverse order, but I don't think I'll be disappointed either way.

The last thing I want to leave you with is a quote from this book. I like it because Paul Collier uses it to describe the governments in these lower-income countries. Funnily enough, this paragraph sounds like it could be referring to developed countries like Canada and the US:

Vested interests can be relied upon to use their power, resources, and ingenuity to oppose change. Although the reformers have truth on their side, truth is just another special interest, and not a particularly powerful one. The villains willing to lie in order to defeat change have an advantage over those constrained by honesty. Reformers do not have it easy.