Africa

Last Week in the Top Billion

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For my final book before Mali, I read Paul Collier’s The Bottom Billion.  In it, Collier talks about the poorest billion (surprise!), and how they differ from the more prosperous poor.  Like Jeffrey Sachs‘ idea of a poverty trap, Collier writes about four traps that are keeping the bottom billion down:

  1. The conflict trap:  “the risk that a country in the bottom billion falls into civil war in any five-year period is nearly one in six.” And, “the typical postconflict country has little better than a fifty-fifty chance of making it through the first decade in peace”.  Not great odds.
  2. The natural resource trap:  the exporting of a valuable natural resource causes “Dutch disease”, increasing the value of the country’s currency, reducing the competitiveness of the country’s other exports, and leaving the natural resource the only industry.  Also developing countries have a tough time coming up with ideal ways of handling the windfall of capital.
  3. Being landlocked with bad neighbors:  the neighbors of a landlocked country are important as a transportation route to the sea and as markets themselves.  For non-African landlocked countries, for every one percent growth in a neighbor, the country grew 0.7 percent — in Africa the country only grew 0.2 percent.
  4. Having bad governance in a small country:  “starting from 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…if it had recently emerged from civil war”.  He highlights the fact that “democracy doesn’t seem to help policy turnaround”.

And unlike other books that just describe the problems, he has researched solutions:  aid, military intervention, laws and charters, and trade policy.  But I’ll let you read about those.  I have more developed country luxuries to enjoy before I leave, like Giada.

Aid in Africa

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I just read Dead Aid by Dambisa Moyo, who is originally from Zambia, worked for Goldman Sachs for awhile, and went to Harvard and Oxford.  Moyo discusses that why there hasn’t been vast improvement in development even with the $1 trillion-plus that the West has given to Africa.  She argues that aid is actually hindering growth – in that there is no accountability, it incentivizes governments not to find solutions or other forms of revenue, it puts and keeps corrupt officials in power, and it hurts domestic growth.

One example of the hurting domestic growth:

There is a mosquito net maker in Africa…enter vociferous Hollywood movie star who rallies the masses, and goads Western governments to collect and send 100,000 mosquito nets to the afflicted region…with the market flooded with foreign nets, however, our mosquito net maker is promptly put out of business.

Her solution:  tell African countries that their aid flow will end in five years.  This will force the country to find other, more accountable forms of financing such as trade, FDI, bonds, remittances, and micro-financing, all leading to a more accountable government, a strengthening of institutional infrastructure, and growth.

Another interesting point from this book:  Africans believe that the Chinese are more helpful than Americans because of all their FDI. The Chinese also give their investments without conditions of reform or policy, and simply require that the specific project of building a road or power infrastructure be done.  And the Chinese make sure the recipients of their money are accountable.

Moyo also criticizes Jeffrey Sachs‘ vision of the Millennium Development Goals, and they’ve had a few responses to each other here and here.

It’s tough to wrap my head around all of it.  Yes, if we cut aid that will result in immediate issues and perhaps deaths of the poor.  But, would continuing aid at current and increased levels just perpetuate the current environment, and hurt more than those who suffer while countries scramble to find more accountable funding?