The “bottom billion”

Added: 06-12-2018

“Bottom billion” nations are ones suffering from poor governance, economic hardship and slow growth. Paul Collier argues that to raise these nations out of poverty they must support standards, among other economic measures, to better capitalize on resource booms, such as oil finds, that often set developing countries back in the long run due to poor governance surrounding the resource.

Marshall Plan natural resources bottom billion checks and balances curse Paul Collier environmental and resource rights commodification growth

Type Reading Time Author Date Source
video 17 minutes PAUL COLLIER 01-13-2008 https://www.ted.com/
Type Reading Time
video 17 minutes
Author Date
Paul Collier 2018-06-12 00:00:00 UTC
Source
https://www.ted.com/
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Key Takeaways
  • The USA and other ‘rich’ countries must more get involved in development for other countries to succeed

  • Collier finds that a key problem for ‘developing’ countries is how short term gains, such as resource boom, often give way to larger losses do to mismanagement.

Summary 

In this TED Talk, based on Collier’s book The Bottom Billion, Collier presents an optimistic approach to solving the dilemma of the bottom billion. But he makes it clear that this is not possible if “rich countries”, such as the US, do not get involved seriously. 

In Collier’s opinion, the last time the “rich world” got serious about helping another region was in post-war Europe with the Marshall Plan. To do this, the US drastically altered its own policies in four major ways: 

  • Aid: Massive Marshall aid program given to Europe, largely England and France 
  • Trade policy: Open markets, institutionalized trade liberalization, abandoned isolation 
  • Security: Isolationist, expanded troops in Europe 
  • Abandon 11th commandment: National sovereignty ignored, founded UN and IMF.   

Aid, trade, security and governance are still essential components of developing what Collier refers to as “needy nations”, but this time the challenge is reversing divergence of nations, not rebuilding Europe.

The Resource Curse
Collier argues one of the biggest obstacles to development is commodity booms. Many countries in the “bottom billion” are suffering from oil, metal and other resource booms. These flows of resources are much larger than aid to any of these countries. 

The Problem?
The short term gains in these countries consistently give way to losses in the long term. Collier argues that governance is the leading reason for resource booms to cause trouble for countries. Many Western nations, like Norway or Australia have ridden resource booms to sustain growth, while places like Uganda and Sierra Leone flounder due to how they handled the revenue from resources. 

Democracy
In his research, Collier consistently found democracy to be linked to “bottom billion” countries. He found that “instant” democracy, such as that in 1960’s Africa or 1990’s Europe, is the source of the problem. Without proper checks and balances, these countries handled resource booms worse than autocracies, and were set back farther than they would have been if they never had a boom at all. 

Standards
His solution is to implement international standards that are applied when resource booms occur in order to properly harness the boom’s revenue. For example, passing laws that demand governments to reveal their revenue and spending from resource booms. Also, changing the process for selling extraction rights through auctions so that the entire country benefits, not just ministers. 

“Bottom billion” nations need an informed citizenry, one that will hold their government accountable. “Rich countries”, Collier argues, must contribute policy advice to support standards and auctions for resources, among other economic policies. 

Analysis 

In many cases, foreign companies will find tax loopholes to help them bypass the government structures designed to compensate for the extraction of natural resources. One example of this is that many European companies exploit antiquated trade laws to drop taxes on intra-company trade, something that makes up about 60% of international trade. When taken in sum with many other loopholes in trade laws and regulations, one can see why the well resourced and high capacity foreign companies have a huge advantage in protecting and securing revenue from resource booms compared to their counterparts in Africa and elsewhere. 

Other Notes