How to help the poorest

How to help the poorest
Springing the traps

Aug 2nd 2007
From The Economist print edition

THIS slip of a book is set to become a classic of the “how to help the world's poorest” genre. Its author, Paul Collier, an Oxford economics professor, has spent 30-odd years puzzling mainly over sub-Saharan Africa and trying to work out why so many of its 48 countries have become basket cases. Crammed with statistical nuggets and common sense, his book should be compulsory reading for anyone embroiled in the hitherto thankless business of trying to pull people out of the pit of poverty where the “bottom billion” of the world's population of 6.6 billion seem irredeemably stuck.

Mr Collier reckons that most of the bottom billion live in 58 countries, 70% of them in Africa and most of the rest in Central Asia. Since the 1990s, more than 4 billion people in the poor world have begun to move out of the depths of poverty, some of them very fast. But the countries where the poorest live have barely grown at all since the 1970s.

Most of them are caught, as Mr Collier describes it, in one or more of four traps: wars, in which 73% of the poorest have been caught at one time or another; natural resources gone wrong (think of Nigeria and its oil), which accounts for about 30%; landlocked with bad neighbours (look at Chad); and the bad-governance-in-a-small-country trap (too many to name).

What comes most convincingly out of Mr Collier's book is that aid from the guilt-ridden West is not the answer, or at least not the main answer, and certainly not aid as it has so often been disbursed. For sure, aid has not been useless. “A reasonable estimate is that over the past thirty years [aid] has added one percentage point to the annual growth rate of the bottom billion,” he writes. “Aid has been a holding operation preventing things from falling apart.”

But Mr Collier is sceptical about the mantra of doubling aid to Africa, as the rich countries' leaders grandly promised at Gleneagles in Scotland two years ago. “The statistical evidence generally suggests that aid is subject to what is called ‘diminishing returns’,” he writes. Take Nigeria. Over the past 30 years or so, it has received some $280 billion “with depressingly little to show for it”. Plainly, vast dollops of aid have gone down the drain. In one of many statistical cameos, he cites a study showing that only 1% of €20m of aid sent to Chad actually reached the rural health clinics that were its intended target.

The rich world should concentrate, he argues, not on throwing aid at Africa, whether in budget support or projects, but on taking measures to encourage growth, above all through improving trade. The poor billions of East Asia have begun to race out of poverty not because of aid (very few received much) but because the conditions were created for their countries' economies to grow.

Mr Collier has an array of suggestions, all of them sensible, though some are unlikely to be taken up soon. For instance, he makes a bold case for military intervention to restore order in failing states (like Somalia); “the typical cost of a civil war”, he calculates, is “around $64 billion.” He also lists a raft of laws that should be enacted by Western governments, and of charters, mainly for poor countries to sign up to, that would provide a framework for setting things on the right track. Five suggested charters—for natural resources revenues, for democracy, for budget transparency, for post-conflict situations, and for investment—set out the sort of norms which, if adhered to by rich governments and poor ones, would help hoist the poorest out of their traps.

In the past two years, two famously opposing clarion calls, one from the aid-loving left, the other from the aid-is-always-wasted sceptical right, have been trumpeted. The one, Jeffrey Sachs's “The End of Poverty”, exaggerates the value of aid, especially in the massive dollops he proposes. The other, William Easterly's “The White Man's Burden”, rightly mocks the delusions of the aid lobby but exaggerates the negative aspect. Mr Collier, though tending towards the second view, steers a masterly course between the two.