- ‘This book is about the Malawis Ethiopias Malawi Sierra Leone India China
- ‘If nothing is done about it, this group will gradually diverge from the rest of the world economy over the next couple of decades, forming a ghetto of misery and discontent.’ (xi)
- ‘Unfortunately, it is not just about giving these countries our money. If it were, it would be relatively easy because there are not that many of them. With some important exceptions, aid does not work so well in these environments, at least as it has been provided in the past. Change in the societies at the very bottom must come predominantly from within; we cannot impose it on them.’ (xi)
- ‘These ideas open horizons across the political divide. The left will find that approaches it has discounted, such as military interventions, trade, and encouraging growth, are critical means to the ends it has long embraced. The right will find that, unlike the challenge of global poverty reduction, the problem of the bottom billion will not be fixed automatically by global growth, and that neglect now will become a security nightmare for the world of our children. We can crack this problem; indeed, we must. But to do so, we need to build a unity of purpose.’ (xi-xii)
- ‘This book is an attempt to shift thinking; it is written to be read, and so I have kept clear of footnotes and the rest of the usual grim apparatus of professional scholarship. I have tried to write something that you can enjoy reading. But don’t let that lead you to conclude that what I have to say is just a load of froth. Underpinning the book are a mass of technical papers published in professional journals and subjected to blind refereeing.’ (xii)
- ‘There is a different way of getting to the answers, and it is statistical. This stands in contrast to the crude images that often provide us with what we think we know about the world. For rebellion, as an example, the image is often that of Che Guevara, ubiquitous in my generation as a poster on student walls. The poster did our thinking for us. Our notions about the problems of the poorest countries are saturated with such images: not just of noble rebels but of starving children, heartless businesses, crooked politicians. You are held prisoner by these images. While you are held prisoner, so are our politicians, because they do what you want. I am going to take you beyond images. Sometimes I am going to smash them. And my image smasher is statistical evidence.’ (xii)
- ‘When I want to use a geographic label for them I describe them as ‘Africa +,’ with the + being places such as Haiti, Bolivia, the Central Asian countries, Laos, Cambodia, Yemen, Burma, and North Korea. They are either still in one of the traps or escaped too late.’ (7)
- ‘So, how have countries of the bottom billion been doing? First, consider how people live, or rather die. In the bottom billion average life expectancy is fifty years, whereas in the other developing countries it is sixty-seven years. Infant mortality – the proportion of children who die before their fifth birthday – is 14 percent in the bottom billion, whereas in the other developing countries it is 4 percent. The proportion of children with symptoms of long-term malnutrition is 36 percent in the bottom billion as against 20 percent for the other developing countries.’ (7-8)
- ‘When we get the data appropriately averaged, what do we find? Those developing countries that are not part of the bottom billion – the middle four billion – have experienced rapid and accelerating growth in per capita income. Let’s take it decade by decade. During the 1970s they grew at 2.5 percent a year, hopeful but not remarkable. During the 1980s and 1990s their growth rate accelerated to 4 percent a year. During the first few years of the twenty-first century it accelerated again to over 4.5 percent. These growth rates may not sound sensational, but they are without precedent in history. They imply that children in these countries will grow up to have lives dramatically different from those of their parents. Even where people are still poor, these societies can be suffused with hope; time is on their side.’ (8-9)
- ‘Before globalization gave huge opportunities to China India
- ‘Over the next two decades the true nature of the problem is going to become apparent, however, because the countries that are trapped in stagnation or decline are now pretty well the poorest. The average societies of the bottom billion now has an income only around one-fifth that of the typical person in the other developing countries, and the gap will just get worse with time.’ (10)
- ‘By 2050 the development gulf will no longer be between a rich billion in the most developed countries and five billion in the developing countries; rather, it will be between the trapped billion and the rest of humankind.’ (11)
- ‘I am definitely not arguing that we should be indifferent to how an economy grows. The growth of Equatorial Guinea
- ‘The suspicion of growth has inadvertently undermined genuinely strategic thinking.’ (11)
- ‘We cannot make poverty history unless the countries of the bottom billion start to grow, and they will not grow by turning them into Cuba Cuba Cuba
- ‘The problem of the bottom billion is serious, but it is fixable. It is much less daunting than the dramatic problems that were overcome in the twentieth century: disease, fascism, and communism.’ (12)
- ‘Seventy-three percent of people in the societies of the bottom billion have recently been through a civil war or are still in one.’ (17)
- ‘So what causes civil war? Rebel movements themselves justify their actions in terms of a catalogue of grievances: repression, exploitation, exclusion. Politically motivated academics have piled in with their own hobbyhorses, which usually cast rebels as heroes. I have come to distrust this discourse of grievance as self-serving.’ (18)
- ‘The first link we found was between risk of war and initial level of income. Civil war is much more likely to break out in low-income countries: halve the starting income of the country and you double the risk of civil war. One might ask whether we got the causality mixed up – is it just that war makes a country poor, rather than that poverty makes a country prone to war?’ (19)
- ‘What else makes a country prone to civil war? Well, slow growth, or worse, stagnation or decline. As an approximation, a typical low-income country faces a chance of civil war of about 14 percent in any five-year period. Each percentage point added to the growth rate knocks off a percentage point from this risk.’ (20)
- ‘Dependence upon primary commodity exports – oil, diamonds, and the like – substantially increases the risk of civil war.’ (21)
- ‘Surprisingly frequently, a hypothesized root cause turns out to be predictable if you already know the hobbyhorse of the speaker.’ (22)
- ‘Unfortunately, you simply can’t trust the rebel discourse of concern for social justice: what else do you expect them to say?’ (22)
- ‘There is basically no relationship between political repression and the risk of civil war.’ (23)
- ‘We could find no relationship between the subsequent risk of civil war and either the country that had been the colonial power or how long the country had been decolonized.’ (23)
- ‘We do find some effect: societies that have one group that is large enough to form a majority of the population, but where other groups are still significant – what we call ‘ethnic dominance’ – are indeed more at risk. Examples are Rwanda Burundi
- ‘The lower a country’s income at the onset of a conflict, the longer the conflict lasts. There was also some tendency for wars to last longer if important export products of the society become more valuable; perhaps in such cases war becomes easier to finance.’ (26)
- ‘The average international war, which is nasty enough, lasts about six months. You can do a lot of damage in six months. But the average civil war lasts more than ten times as long, even longer if you start off poor. In part, such conflicts continue because they become normal.’ (26-27)
- ‘The migration triggered by civil war sharply increases the incidence of disease among the population in the havens to which refugees run. The increase is too large simply to be accounted for by the refugees themselves; what seems to happen is that in their trek across country, refugees are exposed to disease vectors to which they have little resistance, and the diseases they pick up then move with them to their place of refuge, also infecting the people already living in that area.’ (28)
- ‘Sometimes, the rebellion is worth it, with rebel victory ushering in an age of social justice, but this does not happen often. Usually the political legacy is about as bad as the economic legacy – a deterioration in political rights. A rebellion is an extremely unreliable way of bringing about positive change.’ (28)
- ‘Astonishingly, he found that people with a sense of grievance were no more likely to take part in violent protest than those who were not aggrieved. So what characteristics did make people more likely to engage in political violence? Well, the three big ones were being young, being uneducated, and being without dependents. Try as one might, it is difficult to reconcile these characteristics of recruitment with an image of a vanguard of fighters for social justice.’ (30)
- ‘When I settled into discussions with the government, I asked them a question that I always ask when advising a government, because it forces people to get concrete and also serves as a measure of ambition: which country did they wish to be like in twenty years’ time?’ (53)
- ‘Sachs’ work suggested that being landlocked clipped around half a percentage point off the growth rate. The standard slick response to Jeff’s concerns was to point to Switzerland Austria Luxembourg Africa , to Botswana
- ‘The transport costs for a landlocked country depended upon how much its coastal neighbor had spent on transport infrastructure… Why is Uganda Switzerland Switzerland Uganda
- ‘If a country has a lot of natural resources, it is in all likelihood going to be uncompetitive in other exports – the theory of Dutch disease.’ (56)
- ‘We found that in general all countries, landlocked or not, benefited from the growth of their neighbors: growth spills over. The global was that if a country’s neighbor grew by an additional 1 percent, the country grew at an additional 0.4 percent.’ (56)
- ‘In the developing world, excluding Africa , only 1 percent of the population lives in countries that are both landlocked and resource-scarce. Another way of saying this is that other than inAfrica , areas that are far from the coast and don’t have resources simply don’t become countries. Pretty sensible, that: such areas are so dependent upon what the neighboring areas do that it is better to be part of their polity rather than independent.’ (57)
- ‘What can be done to increase growth spillovers from neighbors? Cross-border trade is primarily a matter of transport infrastructure and trade.’ (58)
- ‘Strategy 4: Become a Haven for the Region
Many business services are regionally traded rather than globally traded – for example, some financial services. Often these services depend upon a good policy environment. If one country in a region manages to set policies clearly superior to those of its neighbors, it will attract these services and export them around the region.’ (60)
- ‘Strategy 6: Encourage Remittances’ (61)
- ‘A further constraint upon rural development is the subsidies that are paid to farmers in Europe , Japan United States
- ‘Strategy 9: Try to Attract Aid
Even with a government’s best efforts at these strategies, the country is likely to stay poor for a long time. So it should try to be as attractive as possible to donors.’ (62)
- ‘The minimal state is not a viable model in the context of oil and aid; the government must transform its money into public services. Does corruption impede development given these opportunities? Of course it does. In 2004 a survey tracked money released by the Ministry of Finance in Chad
- ‘A large improvement is not enough; it must be sustained. We decided to define ‘sustained’ as being at least five years. Had we chosen a very long period of sustained improvement, we would have excluded situations such as in Indonesia Indonesia
- ‘We could find only three characteristics that were reliably significant in determining whether a turnaround occurred. Starting from being a failing state, a country was more likely to achieve a sustained turnaround the larger its population, the greater the proportion of its population that had secondary education, and – perhaps more surprisingly – if it had recently emerged from civil war. Among the many characteristics that did not seem to matter one way or the other were democracy and political rights.’ (70-71)
- ‘The expected time before a failing state achieves decisive change is fifty-nine years. The normal condition for a failing state is to be stuck, as bad policies and governance are highly persistent.’ (72)
- ‘All the people living in the countries of the bottom billion have been in one or another of the traps that I have described in the preceding four chapters. Seventy-three percent of them have been through civil war, 29 percent of them are in countries dominated by the politics of natural resource revenues, 30 percent are landlocked, resource-scarce, and in a bad neighborhood, and 76 percent have been through a prolonged period of bad governance and poor economic policies.’ (79)
- ‘Globalization arouses passions: it is considered either wonderful or terrible. I think the sad reality is that although globalization has powered the majority of developing countries toward prosperity, it is now making things harder for these latecomers.’ (80)
- ‘International trade has taken place for several thousand years. However, the most dramatic transformation of the size and composition of trade has been during the past twenty-five years. For the first time in history, developing countries have broken into global markets for goods and services other than just primary commodities. Until around 1980 developing countries’ role was to export raw materials. Now, 80 percent of developing countries’ exports are manufactures, and service exports are also mushrooming.’ (81)
- ‘In order to break into global markets for manufactures it is necessary to get over a threshold of cost-competitiveness. If only a country can get over the threshold, it enjoys virtually infinite possibilities of expansion: if the first firm is profitable, so are its imitators. This expansion creates jobs, especially for youth. Admittedly, the jobs are far from wonderful, but they are an improvement on the drudgery and boredom of a small farm, or of hanging around on a street corner trying to sell cigarettes. As jobs become plentiful they provide a degree of economic security not just for the people who get them but for the families behind the workers. And gradually, as jobs expand, the labor markets tightens and wages start to rise.’ (83)
- ‘The bottom billion will have to wait a long time until development in Asia creates a wage gap with the bottom billion similar to the massive gap that prevailed between Asia and the rich world around 1980.’ (86)
- ‘Capital movements, like trade, normally generate mutual gains. Since political contests are usually presented as zero-sum games – your gain is my loss – the people who are most politically engaged have the hardest time believing in mutual gains. Hence, perhaps, the exaggerated suspicions of globalization.’ (88)
- ‘The lack of capital inflows is only half the story of why global capital markets are not working for the bottom billion. The other half is that their own capital flows out of them. Much of this is illegal, and so it is hidden. It is called capital flight.’ (91)
- ‘Our analysis predicts that the exodus of capital from the bottom billion was only phase one of the global integration of the bottom billion. Phase two will be an exodus of educated people.’ (94)
- ‘Let me be clear: we cannot rescue them. The societies of the bottom billion can only be rescued from within. In every society of the bottom billion there are people working for change, but usually they are defeated by the powerful internal forces stacked against them. We should be helping the heroes. So far, our efforts have been paltry: through inertia, ignorance, and incompetence, we have stood by and watched them lose.’ (96)
- ‘Aid does tend to speed up the growth process. A reasonable estimate is that over the last thirty years it has added around one percentage point to the annual growth rate of the bottom billion. This does not sound like a whole lot, but then the growth rate of the bottom billion over this period has been much less than 1 percent per year – in fact, it has been zero. So adding 1 percent has made the difference between stagnation and severe cumulative decline. Without aid, cumulatively the countries of the bottom billion would have become much poorer than they are today. Aid has been a holding operation preventing things from falling apart. In July 2005 at Gleneagles, the G8 summit committed to doubling to Africa .’ (100)
- ‘The statistical evidence generally suggests that aid is subject to what is called ‘diminishing returns.’ ’ (100)
- ‘A recent study by the Center for Global Development, a Washington think tank, came up with an estimate of diminishing returns implying that when aid reaches about 16 percent of GDP it more or less ceases to be effective.’ (100)
- ‘Our conclusion was that some aid does indeed leak into military spending, but surprisingly little – our best estimate is about 11 percent. This is not negligible, but on the basis of this it would be grossly unfair to claim that aid is wasted. Nevertheless, in those bottom-billion societies that get a lot of aid, even 11 percent of it adds up to quite a lot of the military budget. We estimated that something around 40 percent of Africa ’s military spending is inadvertently financed by aid.’ (103)
- ‘Together with David Dollar, my colleague at the World Bank, I came up with the idea that aid should be allocated so as to lift as many people out of poverty as possible.’ (103-104)
- ‘On average, as far as we can tell, aid has no direct effect on the risk of civil war, though it has indirect effects (which I will come to shortly). This does not mean that it never has direct effects: people expert in particular situations can give you stories on each side, of aid inciting war or averting it. Any of these may well be right, but they do not add up to a systematic relationship. With coups it is a different matter: big aid indeed makes a coup more likely.’ (104-105)
- ‘The cost-benefit analysis of aid for security looks very different in postconflict situations. In these situations the security benefits alone are more than enough to justify a large aid program. Recall that these are the times of highest risk – around half of all civil wars are postconflict situations gone wrong. Aid happens to be particularly effective in raising the growth rate in these situations. This is hardly surprising – this is how aid got started. The World Bank was originally called the International Bank for Reconstruction and Development, and in fact the ‘and Development’ bit was literally an add-on. Aid was invented to rebuild Europe after the Second World War. It worked. In more recent times the mistake with aid to postconflict situations has been that it has been too little and too soon. Yes, too soon. The peace settlements hit the media and the politicians hit their checkbooks. Aid floods in during the first couple of years, then rapidly dries up. Yet the typical postconflict country starts with truly terrible governance, institutions, and policies. It takes some time to improve them to a level at which aid can be of much use. So big aid needs to be sustained during the first decade postconflict, not just the first couple of years. To their credit, the donors are learning.’ (106)
- ‘In 2005 the rules were changed so that extra money now lasts for seven years, a much more reasonable time frame.’ (106)
- ‘In retrospect, it was perhaps a mistake for the international system to permit economically unviable areas to become independent countries. But the deed is done, and we have to live with the consequences. One of the consequences is the need for big aid as a means of raising domestic consumption in these desperately poor environments, even if the aid does not do much for growth. For these countries the psychology of aid needs to recognize that it is not there as a temporary stimulus to development, it is there to bring some minimal decency to standards of living. Probably the key role for development aid – as opposed to direct support for consumption – in the landlocked countries is to improve their transport links to the coasts.’ (107)
- ‘The shift away from infrastructure was also because there was growing pressure to spend aid on the photogenic social priorities – health and education – and on the increasingly sacred environmental goals (both of which got networks all to themselves at the World Bank).’ (108)
- ‘Voting line by line on USAID’s budget, Congress has diverted spending so as to benefit particular American exporters, unrelated to African needs.’ (110)
- ‘Politics is full of idiosyncrasies, and from time to time reform-minded ministers and presidents come to power. But it is very difficult for them to implement change because they inherit a civil service that is an obstacle rather than an instrument. It is hostile to change because individual civil servants profit from the tangled mess of regulations and expenditures over which they preside. Aid has a potential role of providing the skills that the civil service lacks when they are most needed.’ (111)
- ‘Even to distinguish between technical assistance and money to governments was difficult because the donor agencies just have not been bothered to record their activities properly.’ (112)
- ‘The politically correct answer to the need for technical assistance is to support ‘capacity building’ instead: that means train the locals rather than fly in the experts. There is a lot of sense in capacity building, but there is also a chicken-and-egg problem. Until the country has an international standard, and if there are no prospects, then they use their credentials as a passport out of the country.’ (112)
- ‘Technical assistance in a failing state prior to turnaround has little effect on the prospect of a turnaround occurring. The experts come and preach and people listen politely, but not much happens. This is bad news for the agencies that do this and little else, and it is also bad news for failing states.’ (113)
- ‘Technical assistance during the first four years of an incipient reform, and especially during the first two years, has a big favorable effect on the chances that the momentum of the reforms will be maintained.’ (114)
- ‘Technical assistance packages during reform could usefully be really big – typically up to around $250 million a year could be spent on providing technical expertise before additional money became useless.’ (114)
- ‘The payoff came out at around $15 billion, and the cost of maximal technical assistance sustained for four years is only around $1 billion. So donors were in fact missing a really good opportunity for aid: spend $1 for an expected return of $15. And don’t forget that the only benefits counted in that $100 billion are to the neighborhood; the additional security that spills over to the wider world is a bonus.’ (114)
- ‘Technical assistance needs to be reorganized to look more like emergency relief and less like a pipeline of projects. Just as when the Southeast Asian tsunami struck in December 2004 emergency relief teams were quickly flown in, so when political opportunities arise, skills should be available.’ (115)
- ‘Aid is not very effective in inducing a turnaround in a failing state; you have to wait for a political opportunity. When it arises, pour in the technical assistance as quickly as possible to help implement reform. Then, after a few years, start pouring in the money for the government to spend.’ (116)
- ‘A focus on results can very easily encourage people to avoid failures at all costs. And if this happens aid will increasingly be directed to the safe option of countries where performance is already satisfactory. To its credit the British government has understood this problem and provided the World Bank with the money to launch a fund that can be used to support the turnarounds. Will other governments put money into this fund? To my mind that is one of the critical steps for aid in the next couple of years. If you want your children to grow up in a world with fewer failing states, one of the practical things you can do about it is to urge your government to back this sort of aid finance.’ (117)
- ‘The environments in which agencies should increasingly be operating are those in which to be effective they will need to spend more on administration, not less. Mismeasurement of bureaucratic performance is a general problem. In aid agencies it encourages low-risk, low-administration operations that are the precise opposite of what they will need to be doing to meet the coming development challenges.’ (118)
- ‘There is one other approach I would like to see tried in failing states, and that is what is known as ‘independent service authorities.’ The idea is that in countries where basic public services such as primary education and health clinics are utterly failing, the government, civil society, and donors combined could try to build an alternative system for spending public money. The key features would be a high degree of scrutiny by civil society as to how the money was being spent; competing channels of service delivery, encompassing public, private, and NGO; and continuous evaluation to see which was working best. The authority would be a wholesale organization for purchasing basic services, buying some from local governments, some from NGOs such as churches, and some from private firms. It would finance not just the building of schools and clinics but also their day-to-day operation. Once such an organization was put into place, managed jointly by government, donors, and civil society, both donors and the government would channel money through it.’ (118-119)
- ‘To be clear, I do not want these authorities everywhere in the bottom billion. I want them to be an option in the worst settings, where the realistic prospect is that otherwise we are going to wait a long time for significant change.’ (120)
- ‘The IMF feels so strongly about this that its current chief economist, Raghuram Rajan, a smart academic on leave from the University of Chicago’s business school, launched a blistering public critique of aid in June 2005, just ahead of the G8 summit. It became a front-page headline in the Financial Times. His research showed that aid tended to retard the growth of labor-intensive export activities, precisely the activities needed for diversification in the bottom billion. So there is indeed a problem, and it has to be faced rather than denied. Fortunately, quite a lot can be done about it. For a start, the aid can be spent on helping the export sector – for example, improving infrastructure at the ports.’ (121)
- ‘Aid improves the opportunities for private investment, and so money that otherwise would have fled the country gets invested inside it. That is evidently quite possible. The question is which predominates empirically.’ (123)
- ‘Aid, however, is not the only answer to the problems of the bottom billion. In recent years it has probably been overemphasized, partly because it is the easiest thing for the Western world to do and partly because it fits so comfortably into a moral universe organized around the principles of sin and expiation. That overemphasis, which comes from the left, has produced a predictable backlash from the right. Aid does have serious problems, and more especially serious limitations. Alone it will not be sufficient to turn the societies of the bottom billion around. But it is part of the solution rather than part of the problem. The challenge is to complement it with other actions.’ (123)
- ‘After Iraq
- ‘The 1990s began well for military intervention – the expulsion of the Iraqi invasion of Kuwait Kuwait
- ‘That is what modern armies are for: to supply the global public good of peace in territories that otherwise have the potential for nightmare.’ (125)
- ‘The consequences for Somalia Somalia
- ‘This chapter is written for people who cannot imagine that it is better for half a million Rwandans to have died than for eighteen Americans to be sacrificed.’ (126)
- ‘By contrast, the British intervention in Sierra Leone Sierra Leone
- ‘Operation Palliser was brilliant, and the British army can be proud of its contribution to the development of Sierra Leone Iraq Somalia Iraq
- ‘The important thing to remember, though, it that we’ve already discovered what happens when we stick our heads as deep in the sand as they will go: we get Rwanda Sierra Leone Iraq Sierra Leone Sierra Leone Sierra Leone Sierra Leone
- ‘It would be relatively easy to make coups history. We just need a credible military guarantee external intervention. Obviously the European Union is not going to offer a blank check to every regime in the bottom billion. But we could offer a guarantee to democratic governments conditional upon internationally certified free and fair elections.’ (131)
- ‘Our published results indicate that high military spending in postconflict situations is part of the problem, not part of the solution.’ (132)
- ‘High military spending by the government may inadvertently signal to the rebel forces that the government is indeed going to renege on any deal and rule by repression.’ (132)
- ‘I was once brought in to talk to a depressingly large group of finance ministers from postconflict countries, and I put to them this argument that high military spending is likely to be dysfunctional. Despite the fact that military spending is often a taboo subject, there was an enthusiastic chorus of approval led by the finance minister of Mozambique
- ‘If we made the reporting of any potentially corrupt deposits a requirement of banking, and if we made the freezing and repatriation of those deposits radically easier, would it seriously damage our financial system? I doubt it, because if the money is suspected of having a connection to terrorism we already do it. The West’s current concern is terrorism, so we do something about it. The problem of governance in the bottom billion is not seen as ours, and so we do the minimum. Consequently, corrupt politicians in the bottom billion continue to stack their money away in Western banks.’ (136)
- ‘It is not just banks. Until very recently, if a French company bribed a public official in a bottom-billion society, the payment was tax-deductible.’ (137)
- ‘The great commercial game in bottom-billion societies has been to bribe your way into lucrative contract.’ (137)
- ‘In 1999 the OECD managed to organize the necessary coordination to escape this dilemma: an agreement among its member governments that they would all legislate to make bribery of a public official in a foreign country an offense.’ (137)
- ‘Among the companies that pay the bribes two sectors seem to stand out: resource extraction and construction.’ (137)
- ‘The Gleneagles G8 summit in July 2005 announced a doubling of aid, focused on infrastructure. As this gets implements there is going to be a massive construction boom in many of these countries. Under present circumstances, this will amplify what is already a serious problem of misgovernance.’ (138)
- ‘If you want to understand why some countries of the former Soviet Union have done well while others are becoming failing states, a pretty good guide is geography. The further away from the EU and so the less credible the prospect of US
- ‘Resource revenues to the bottom billion are bigger than aid, and far more poorly used. If we could raise the effectiveness of resource revenues even to the present level of aid effectiveness, the impact would be enormous.’ (140)
- ‘An oil field in a developed country is auctioned off in a transparent process. This should be a basic requirement of an international charter on resource extraction.’ (140)
- ‘An oil field in a developed country is auctioned off in a transparent process. This should be a basic requirement of an international charter on resource extraction.’ (140)
- ‘Step three is to make all payments of revenue transparent. This has been the focus of the Extractive Industries Transparency Initiative.’ (141)
- ‘The obvious agency to do this would be the World Bank or the IMF, as either of these has the expertise and does not stand to gain from falsification.’ (141)
- ‘Norway
- ‘A third key pressure point in cleaning up resource revenues is the international companies in the extractive industries. The model here is De Beers and its Kimberly Process for the certification of diamonds. For many years De Beers has been in denial that conflict diamonds were a problem. Then pressure from NGOs persuaded the company that denial was not going to work: if the image of conflict diamonds became entrenched in the mind of consumers, diamonds could go the way of fur. To their considerable credit, De Beers radically changed tack.’ (144)
- ‘De Beers demonstrates that big companies can become a key part of the solution rather than being part of the problem. What worked for diamonds may not work for oil, but in one respect the task of transparency is quite a bit easier: it is far harder to smuggle oil than diamonds. There has been some ‘conflict oil’: at one stage worth about a billion dollars a year was being ‘bunkered’ – stolen – from the delta region of Nigeria
- ‘If there was an international charter on standards along the lines of the five points laid out above, NGOs could start to demand that companies adhere to it. For example, a company that entered into an extraction contract won without competitive bidding would be censured. Potentially it is even possible for oil companies to be required to display at their gas stations where the oil used in the gasoline is from. Obviously, oil from different sources gets mixed together, but for the purposes of consumer pressure the source of oil is a financial contact, not a physical one. If a thousand barrels of oil from Angola Angola Angola
- ‘If Western consumers force the big-brand oil companies to adopt international standards, then in turn the oil companies will pressure their governments – the United States, Britain, and France – to come to an arrangement with China. The West has to offer China China
- ‘Many of the banners at political demonstrations are in English, demonstrating that we are part of the intended audience for these protests. Hence, our message matters, but to date the message has been concerned nearly exclusively with elections. Checks and balances are continuous and complex – they are not events – and so they have been much less newsworthy. The mature democracies now need to use our evident influence to encourage the less visible aspects of democracy.’ (147)
- ‘It would help if there was some international minimum standard, analogous to the minimum standards set out by the European Union. I would start with rules about the media, which are the most effective form of scrutiny.’ (147)
- ‘Democracy is designed very differently in different places, so it is pointless trying to set out some grand blueprint that all democracies should follow. There is, however, one other aspect of democracy where international standards would help to curtail massive abuse, and that it [sic] how money is raised and spent on election campaigning.’ (149)
- ‘An election campaign costs around four times as much there as it does in the United States, despite Russia’s income being only about a tenth of that in America. In relative terms this is forty times the U.S. Nigeria
- ‘Probably parliaments should also set some ceilings on contributions, and require some transparency in party finances. This is not a very ambitious agenda, but it would at least get the issue of campaign finance started.’ (149)
- ‘Only around 20 percent of the money that the [Ugandan] Ministry of Finance released for primary schools, others than for teachers’ salaries, actually reached the schools.’ (150)
- ‘[Ugandan finance secretary] Tumusiime-Mutebile decided to try a completely different approach: scrutiny from the bottom up. Each time the Ministry of Finance released money it informed the local media, and it also sent a poster to each school setting out what it should be getting. Tumusiime-Mutebile is a practical man who wanted to know if things were working, so three years later he repeated the tracking survey. Now, instead of only 20 percent getting through to the schools, 90 percent was getting through. In state-of-the-art statistical research that analyzed the experiment in detail, Reinikka and her colleague Jakob Svensson were able to demonstrate that the media had been decisive – in this case reports in newspapers. So scrutiny turned 20 percent into 90 percent – more effective than doubling aid and doubling it again.’ (150)
- ‘Te idea next surfaced in a process known as the African Peer Review Mechanism, whereby African countries volunteer for self-evaluation, modeled on the OECD. It is also useful within countries, as local governments can be compared against each other and ranked. Public agencies hate such rankings because they generate very effective pressure, both from the humiliation within a peer group and from the anger of users.’ (151)
- ‘A postconflict charter should include guidance on behavior by donors and the international security regime. Donors should be committed for the decade, not just the first couple of high-glamour years. International security forces should likewise be committed for the long haul. In return, postconflict governments should reduce their own military spending – as we have seen, it is dysfunctional. They should have a transparent budgetary process, so that public power does not translate into private profit. They should include opposition groups in power, for example through decentralization. And they should sort out conflicting and confused property claims quickly.’ (152)
- ‘A charter for postconflict situations could also usefully draw on the successful experiences of truth and reconciliation commissions.’ (152)
- ‘One aspect of postconflict policy is noticeable by its absence from the above suggestions: that relating to elections… Elections during the postconflict decade seem to shift the risk. In the year before an election the risk of renewed conflict goes sharply down, perhaps because the various groups direct their energies to the electoral contest. In the year after an election the risk goes equally sharply up: presumably whoever has lost the election does not like the result and is inclined to explore other options. So elections may be desirable for all sorts of reasons, but they do not seem to make the society safer. Perhaps as solutions they have been a little overplayed.’ (153)
- ‘Without radically higher private investment the reforming countries will not be able to reach middle-income status but will linger in limbo and risk falling back into one of the traps. By posing the problem as that of a grasping rich world imposing its rules on a weak poor world, the NGOs conjured up a satisfyingly simple moral struggle in which they could campaign. But it was a fantasy world that, sad to say, did a disservice to the very people the NGOs are passionately trying to help. It was the headless heart in action.’ (156)
- ‘Generally, I do not much care for rich-country wallowing in guilt over development. I find it contrived, and it diverts attention from a practical agenda. Citizens of the rich world are not to blame for most of the problems of the bottom billion; poverty is simply the default option when economies malfunction. However, I am now going to pin some blame on citizens of the rich world, who must take responsibility for their own ignorance about trade policy and for its consequences.’ (157)
- ‘Trade policy is the area of economics least well understood by the NGO world.’ (157)
- ‘There are some indefensible aspects of OECD trade policy. The least defensible, from the perspective of both OECD citizens and people in developing countries, is probably the protection of agriculture. We waste our own money subsidizing the production of crops that then close off opportunities for people who have few alternatives.’ (159)
- ‘Another dysfunctional aspect of rich-country trade policy is tariff escalation: the tariffs on processed materials are higher than on the unprocessed materials. This makes it harder for the countries of the bottom billion to diversify their exports by processing their raw materials before exporting them. It hurts us and impedes the development of countries that are already facing enough impediments.’ (160)
- ‘The quiet life that bottom-billion firms have enjoyed has been paid for by ordinary people, who have faced prices inflated above world levels by protection. That is what protection means. The quiet life has shown up in the rate of productivity growth. In bottom-billion manufacturing the rate has been around zero, in contrast to the global trend of rapid progress.’ (161)
- ‘Inevitably, when exposed to external competition these unviable activities curl up and die. I am not, however, an enthusiast for ‘big bang’ trade liberalization: where there is some hope that firms can become globally competitive it may be better to draw their feet gradually closer to the fire than to push them into sudden death.’ (161)
- ‘The enthusiasm of the villains for the opportunities for corruption that trade restrictions constitute, and the consequent struggle of reformers to reduce barriers, is misread by NGOs such as Christian Aid. Seeing everything through the spectrum of rich countries oppressing poor countries, these agencies spend charitable donations opposing the reduction in African trade barriers. Lenin had a phrase for those in the West who supported him without understanding his true intent: ‘useful idiots.’ Today’s useful idiots campaign for trade barriers.’ (162)
- ‘More aid means less need for exports and so exporters earn less. The mechanism that generates this effect is the exchange rate: aid appreciates the exchanges rate, making a dollar earned by an exporter worth less in terms of local currency. Exporters get squeezed as a result, and some go out of business.’ (162)
- ‘Only with a matching increase in demand are exporters not disadvantaged by the extra aid.’ (163)
- ‘The fair trade campaign attempts to get higher prices for some of the bottom billion’s current exports, such as coffee. The price premium in fair trade products is a form of charitable transfer, and there is evidently no harm in that. But the problem with it, as compared with just giving people the aid in other ways, is that it encourages recipients to stay doing what they are doing – producing coffee.’ (163)
- ‘If you combine a number of poor, slow-growing individual economies, you have a poor, slow-growing regional economy. Trade is really generated by differences, and the big opportunity for low-income countries is to trade with rich countries, harnessing the advantage of their cheap labor. Within a group of poor countries there simply are not sufficient differences to generate much trade. Worse, the differences that do exist between poor countries will get reinforced rather than reduced. The model of the European Community is unfortunately deeply misleading.’ (164)
- ‘The bottom billion do need some helpful OECD trade policies, but they are not fair trade, nor could they be described as trade justice. And they certainly don’t fit with Christian Aid’s Marxist slogan. The bottom billion need to diversify their exports into labor-using manufactures and services, the sort of things that Asia is already doing. Remember that this is the problem – having broken into these markets, low-income Asia now has the huge advantage of established agglomerations where costs are lower than for those just starting up elsewhere. When Asia broke into these markets it did not have to compete with established low-cost producers, because it was the first on the block. For the bottom billion to break into these markets they need temporary protection from Asia .’ (167)
- ‘It is, of course, inconceivably that the OECD would impose new tariffs on Asia that protected the bottom billion in OECD markets, now should they. Rather, they should remove tariffs against the bottom billion where they already have tariffs against Asia . One vital implication of this is that the strategy is urgent. World tariff levels are falling. The WTO is in the process of negotiating mutual tariff reductions between the successful developing countries, which clearly have a lot to bargain with, and the OECD. This is its core business, and over the next decade it will probably succeed. So by around 2015, OECD tariffs against Asia will not be high enough for there to be much scope for protecting the bottom billion.’ (168)
- ‘In this book we have discussed four instruments: aid, security, laws and charters, and trade.’ (176)
- ‘To be effective, an external presence requires troops with a mandate to fight to preserve the peace, as well as contributing governments willing to accept casualties. In return for this external security guarantee, the postconflict government should be required to radically downsize its own army. It has to learn to rule by consent rather than oppression.’ (177)
- ‘In Chapter 9, I proposed a charter for postconflict governance. International actors have had huge power in postconflict situations and have usually been embarrassed to use it because of accusations of infringing upon sovereignty. The international community has so much at stake in these situations that it has to learn to learn to be comfortable with infringing upon sovereignty. But it is far more acceptable for international actors to impose a previously defined international norm than to invent fresh demands on the hoof as a particular situation deteriorates.’ (178)
- ‘The key obstacle to reforming aid is public opinion. The constituency for aid is suspicious of growth, and the constituency for growth is suspicious of aid.’ (183)
- ‘Aid agencies should become increasingly concentrated in the most difficult environments. That means that they will need to accept more risk, and so a higher rate of failure. They should compensate by increasing their project supervision, which means higher administrative overheads. They should become swift-footed, seizing reform opportunities at an early stage. They should intervene strategically, financing big-push strategies for export diversification. They should introduce governance conditionality. At present the powerful force of popular opinion is driving agencies in precisely the opposite direction. They cannot afford failure. They have to be learn with low administrative expenses. They have to prioritize long-term social opportunities for reform and growth. They have to give unconditional debt relief. This is the fault of ordinary citizens who support vociferous lobbies without bothering to get informed. No aspect of domestic policy is run this badly. The aid agencies are not run by fools; they are full of intelligent people severely constrained by what public opinion permits.’ (184)
- ‘We need an alliance between the NGOs and the OECD, which is the bureaucracy for intergovernmental coordination.’ (185)
- ‘The charter for postconflict governance could be promulgated by the new Peace-Building Commission of the United Nations. Launched in September 2005, it has yet to be given a role, but it is evident that it is seen as a coordinating entity rather than as an implementing agency. A charter would be the ideal way of achieving coordination.’ (186)
- ‘The development lobbies themselves, notably the big Western NGO charities, often just don’t understand trade. It is complicated and doesn’t appeal to their publics, so they take the populist line. Even former U.S.
- ‘The objective of development has to be elevated above the level of the development ministry. Because four different branches of government need to be coordinated, the only level of government likely to be effective is the top. The head of government has to accept development as the bottom billion as a personal priority. Obviously I do not mean tat this should be the main priority, for that is unrealistic.’ (188)
- ‘A head of government should not be leading an aid campaign; rather, he or she should be forcing policy coordination across the government.’ (188)
- ‘Coordination on military interventions, trade policies, and international standards is going to be difficult because of recent history: coordination on military intervention is clouded by the spectacular disagreements over Iraq, coordination on trade policy is clouded by the spectacular disagreements on steel and agriculture, and coordination on international standards is clouded by the spectacular disagreements on climate change and the Kyoto Protocol.’ (189)
- ‘It is time to redefine the development problem as being about the countries of the bottom billion, the ones that are stuck in poverty. When I give this message to audiences in aid agencies people shuffle uncomfortably in their seats. Some of them may be thinking, ‘But what about my career?’ for it would no longer be in Rio but in Bangui
- ‘The left needs to move on from the West’s self-flagellation and idealized notions of developing countries. Poverty is not romantic. The countries of the bottom billion are not there to pioneer experiments in socialism; they need to be helped along the already trodden path of building market economies. The international financial institutions are not part of a conspiracy against poor countries; they represent beleaguered efforts to help. The left has to learn to love growth. Aid cannot just be targeted for the photogenic social priorities; it has to be used to help countries break into export markets. At present the clarion call for the left is Jeffrey Sachs’ book The End of Poverty. Much as I agree with Sachs’ passionate call to action, I think that he has overplayed the importance of aid. Aid alone will not solve the problems of the bottom billion – we need to use a wider range of policies. The right needs to move on from the notion of aid as part of the problem – as welfare payments to scroungers and crooks. It has to disabuse itself of the belief that growth is something that is always there for the taking, if only societies would get themselves together. It has to face up to the fact that these countries are stuck, that competing with China India U.S.
- ‘Of course, in a book of this length I cannot set out all the evidence. But I hope that I have convinced you of three central propositions, each unfortunately fairly novel, that encapsulate how thinking needs to change. The first is that the development problem we now face is not that of the past forty years: it is not the five billion people of the developing world and the Millennium Development Goals that track their progress. It is a much more focused problem of around a billion people in countries that are stuck. This is the problem we are going to have to tackle, and if we stick with present efforts, it is likely to be intractable even as the dashboard indicators of world poverty get better and better. The second is that within the societies of the bottom billion there is an intense struggle between brave people who are trying to achieve change and powerful groups who oppose them. The politics of the bottom billion is not the bland and sedate process of the rich democracies but rather a dangerous contest between moral extremes. The struggle for the future of the bottom billion is not a contest between an evil rich world and a noble poor world. It is within the societies of the bottom billion, and to date we have largely been bystanders. The third is that we do not need to be bystanders. Our support for change can be decisive. But we will need not just a more intelligent approach to aid but complementary actions using instruments that have not conventionally been part of the development armory: trade policies, security strategies, changes in our laws, and new international charters. In short, we need to narrow the target and broaden the instruments. That should be the agenda for the G8.’ (192)
No comments:
Post a Comment