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Wednesday, June 27, 2007

Sachs vs. Easterly vs. Collier

Niall Ferguson likes Paul Collier's approach to helping poor countries:

The Least Among Us, by Niall Ferguson, Book Review, NY Times: Why the Poorest Countries Are Failing and What Can Be Done About It. By Paul Collier. Oxford University Press.

It is perhaps a sign of how far sub-Saharan Africa still has to go that the most vigorous ... debate about its economic future ... has been between two American economists based in New York. On one side ... is Jeffrey D. Sachs, ... at Columbia University and the author of “The End of Poverty.” On the other is William Easterly of New York University, whose ironically titled “White Man’s Burden” lampoons Sachs...

Sachs’s ... conviction [is] that Africa can be saved with $75 billion a year in Western aid. ... In Easterly’s opinion, the present generation of white philanthropists is no more likely than earlier ones to succeed in a self-appointed (and at times unwittingly imperial) mission of enlightening the Dark Continent.

Now comes another white man, ready to shoulder the burden of saving Africa: Paul Collier, the director of the Center for the Study of African Economies at Oxford University. ... It was Collier who ... pioneered a new and unsentimental approach to the study of civil wars, demonstrating that most rebels in sub-Saharan Africa are not heroic freedom fighters but self-interested brigands.

Collier is certainly much closer to Easterly on the question of aid. ... Yet “The Bottom Billion” proves to be a far more constructive work than “The White Man’s Burden.” Like Sachs, Collier believes rich countries really can do something for Africa. But it involves more — much more — than handouts. ...

Collier’s is a better book than either Sachs’s or Easterly’s for two reasons. First, its analysis of the causes of poverty is more convincing. Second, its remedies are more plausible.

There are, he suggests, four traps into which really poor countries tend to fall. The first is civil war. Nearly three-quarters of the people in the bottom billion ... have recently been through, or are still in the midst of, a civil war. Such wars usually drag on for years and have economically disastrous consequences. ... Unfortunately, ... the poorer a country becomes, the more likely it is to succumb to civil war... And once you’ve had one civil war, you’re likely to have more...

Why ... have so many sub-Saharan countries become mired in internal conflict? Collier['s] ... conclusions are central to this book. Civil war ... has nothing much to do with the legacy of colonialism, or income inequality, or the political repression of minorities. Three things turn out to increase the risk of conflict: a relatively high proportion of young, uneducated men; an imbalance between ethnic groups, with one tending to outnumber the rest; and a supply of natural resources like diamonds or oil, which simultaneously encourages and helps to finance rebellion.

It was in fact Collier who first came up with the line “diamonds are a guerrilla’s best friend,” and a substantial part of this book concerns itself with ... the “resource curse,” his No. 2 trap. As he sees it, the real problem about being a poor country with mineral wealth ... is that “resource rents make democracy malfunction”... Trap No. 3 is that landlocked countries are economically handicapped... Yet this is a minor handicap compared with Trap No. 4: bad governance. Collier has no time for those who still seek to blame Africa’s problems on European imperialists. As he puts it bluntly: “President Robert Mugabe must take responsibility for the economic collapse in Zimbabwe since 1998...”

[W]hat can the rich countries do? Clearly we can’t relocate Chad or rid Nigeria of its oil fields. Nor, Collier argues, can we rely on our standard remedies of aid or trade, without significant modifications. As a general rule, aid tends to retard the growth of the labor-intensive export industries that are a poor country’s most effective engine of growth. And much aid gets diverted into military spending. ...

Trade, too, is not a sufficient answer. The problem is that Asia has eaten Africa’s lunch when it comes to exploiting low wage costs. ... Now, to stand any chance of survival, African manufacturers need some temporary protection from Asian competition. ...

This, however, is not the most heretical of Collier’s prescriptions. Reflecting on the tendency of postconflict countries to lapse back into civil war, he argues trenchantly for occasional foreign interventions in failed states. What postconflict countries need, he says, is 10 years of peace enforced by an external military force. If that means infringing national sovereignty, so be it.

At a time when the idea of humanitarian intervention is selling at a considerable discount, this is a vital insight. ... It is easy to forget, amid the ruins of Operation Iraqi Freedom, that effective intervention ended Sierra Leone’s civil war, while nonintervention condemned Rwanda to genocide.

Still, it would be wrong to portray Collier as a proponent of gunboat development. In the end, he pins more hope on the growth of international law than on global policing. Perhaps the best help we can offer ..., he suggests, comes in the form of laws and charters: laws requiring Western banks to report deposits by kleptocrats, for example, or charters to regulate the exploitation of natural resources, to uphold media freedom and to prevent fiscal fraud. We may not be able to force corrupt governments to sign such conventions. But simply by creating them we give reformers in Africa some extra leverage. ...

As Collier rightly says, it is time to dispense with the false dichotomies that bedevil the current debate on Africa: “ ‘Globalization will fix it’ versus ‘They need more protection,’ ‘They need more money’ versus ‘Aid feeds corruption,’ ‘They need democracy’ versus ‘They’re locked in ethnic hatreds,’ ... ‘Support their armed struggles’ versus ‘Prop up our allies.’ ” ...

    Posted by on Wednesday, June 27, 2007 at 02:25 PM in Economics | Permalink  TrackBack (0)  Comments (32)

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