Helping the Bottom Billion

Stephen DeAngelis

November 9, 2007

A couple of weeks ago, Robert Zoellick, President of the World Bank, presided over his first annual meetings for that institution. That occasion prompted Washington Post op-ed contributor Paul Collier, an economics professor at Oxford University, to ask “Will the Bottom Billion Ever Catch Up?” [21 October 2007].

“As the world’s finance and development ministers descended on Washington, … Zoellick established himself firmly at the head of the most important agency designed to ensure that globalization does not leave people behind, mired in desperate poverty. But he faces a planet that has changed far more rapidly than his institution has. The Third World has shrunk, but it hasn’t vanished. The new third world — the hard core of the development challenge that Zoellick faces — is composed of about 50 countries that are home to a billion people.”

First, second, and third world designations have long abandoned the ideological framework in which they were first used. Today, they more closely resemble Tom Barnett’s Core, Seam, and Gap countries. Core countries are the first tier of globalized nations that are well connected to international economy and prospering as a result. Seam countries are those trying their best to connect so that can benefit from globalization’s advance; but their geographical location often places them next to gap countries where things like conflict and corruption act as anchors on development. Some countries, like China and India straddle groups but are moving in the right direction. It is in these emerging market nations that Enterra Solutions’ Development-in-a-Box™ framework is designed to work. The problem that Collier’s column addresses whether Gap countries — those at the bottom — can advance. Collier continues:

“Globalization is propelling China and India toward wealth, and both are closing in on the prosperous with unprecedented speed. But globalization is not working for the bottom billion. Their incomes have been virtually stagnant. From 1960 to 2000, the new third world experienced no growth at all. Meanwhile, the economies of the rest of the developing world have enjoyed accelerating growth, decade by decade. First gradually, then rapidly, the bottom billion have fallen away from the rest of mankind. Encouragingly, Zoellick has picked up on this. “Globalization must not leave the bottom billion behind,” he told the National Press Club on Oct. 10. But it already has.”

What Collier means is that development is not stagnant. A country is either advancing or it is falling behind. In this accelerated information age, countries that are advancing are outpacing the bottom billion so badly that those at the bottom are being left in the dust and, as a result, are choking on poverty.

“During the golden decade of the 1990s, between the end of the Cold War and 9/11, the bottom billion’s divergence from the middle 4 billion people on Earth accelerated to 5 percent a year, measured in per capita gross domestic product. By the millennium, the income gap between the average citizens of the bottom billion and those of the middle 4 billion was 5 to 1. And if you think that wealth gap is alarming, think about the lucky billion — in Europe, North America, Japan and elsewhere — at the top.”

Collier complains that organizations like the World Bank and the United Nations study global poverty and then report on it from a “bean counting” perspective. The numbers, Collier insists, don’t tell the most important part of the story. In the past, he notes, poverty-stricken populations knew they were struggling, but they didn’t really understand their relative position at the bottom of the pyramid. That, he says, is no longer the case.

“It is not enough that absolute levels of poverty start to fall in the new third world. The further a billion people fall behind the rest of humankind, the more it will present the world of our children with unmanageable pressures. Even as the world’s economies are bifurcating, the Earth continues to draw closer together socially through information and migration. So youth in the bottom billion know that they are being left behind. To catch up, they will need spectacular increases in growth.”

One challenge is that this impoverished billion at the bottom live in places that don’t really mean very much to developed countries. The primary thing that draws wealthy countries to pay attention to them is moral obligation not national interest.

“Most of the bottom billion live in Africa, but the countries at the bottom are scattered across the continents: places such as Haiti and Bolivia in Latin America, Yemen in the Middle East, many of the ‘stans’ in Central Asia, and Laos and East Timor in East Asia. They are nearly all small, which is part of the problem. Countries with small and poor populations tend to lack the critical mass of educated and talented people to diagnose failure and do something about it. Globalization has compounded this shortage by making exits both feasible and attractive: The bottom billion are hemorrhaging their limited talent. Chinese students go back to China, Indian students now go back to India, but students from the countries of the bottom billion don’t go back. Many of these small countries are also plagued by civil war. Imagine if India or China were divided into 50 countries. Do you think they would all be at peace? To be small is also to be at the mercy of your neighbors, especially if you are landlocked.”

Some might be tempted to point to the small, landlocked Kurdish region of Iraq to demonstrate that the conditions Collier describes need not be fatal. There are 25 million ethnic Kurds, however, and they are backed by a very supportive and prosperous diaspora. Most of the countries at the bottom of the pyramid have no such support group of wealthy expatriates. I have written about some necessary pre-conditions that are helpful for development programs to gain traction. Collier’s point is that most of those pre-conditions are missing in countries at the bottom. He muses about whether America would have become prosperous had each state attempted to develop separately.

“Suppose this country were not the United States but the Divided States, each sovereign and self-serving. The great manufacturing and agricultural heartland states would have been strangled at birth by the absence of interstate highways, railways and canals. The plight of Niger, which is dependent on Nigeria, and of Uganda, which is dependent on Kenya, is to be landlocked and located in the Divided States of Africa. A third of Africa’s population lives in such countries.”

Since one of the primary responsibilities of central government is to develop critical infrastructure, it is easy to understand how some countries are limited in what they can do. Eventually, public/private partnerships are going to have to be developed to fill that need. There are thousands of ethnic groups longing to found their own countries. The plight of countries at the bottom of the economic pyramid should serve as a warning that separatist movements aren’t generally the path to prosperity. So what’s to be done? We can start, Collier argues, by helping create the pre-conditions necessary for develop.

“In each country of the new third world, reformers are struggling with entrenched interests. Catching up depends on the reformers winning these struggles. We can’t do that for them, but we can make their battles a whole lot easier than they have been. In 1945, the United States got serious about rebuilding Europe. Yes, there was aid, through the Marshall Plan. But there was also trade: Washington reversed the protectionism of the 1930s and created the General Agreement on Tariffs and Trade, thereby integrating Europe into the U.S. economy. And there was also security: Washington reversed the isolationism of the 1930s and created NATO, thereby stabilizing Europe by placing U.S. troops on European soil for decades. And there was also a shrewd attempt to create systems that produce good governance: Washington created the Organization for Economic Cooperation and Development and encouraged the formation of the European Economic Community, thereby starting the process of mutually setting standards that locked first Greece, Spain, and Portugal and then much of Eastern Europe into democratic market economies. It’s feasible to get the bottom billion on a more prosperous track, but doing so will require a serious approach that utilizes all the instruments at our disposal — and is sustained for at least two decades. Indeed, we will need the same toolkit we used in the recovery of postwar Europe: aid, trade, security and good governance, though utilized differently.”

I’d like to underscore two points that Collier makes. First, the solution must be holistic (getting all national sectors involved). Second, it won’t be easy and it will take a long time — Collier predicts at least two decades. When we started contemplating Development-in-a-Box, we knew the approach had to be holistic. We also knew it would be tough to achieve. Collier properly identifies the pre-conditions that can help set the stage for the Development-in-a-Box framework: aid (which I assume will be used to educate the population and improve their health), security, and good governance. Trade, I agree, is also critical, but sustainable trade only follows when the other pre-conditions are in place, because they are necessary conditions to attract foreign direct investment.

“Aid will probably be more or less as important to helping the bottom billion as it was to saving postwar Europe: part of the solution but not decisive. The exclusive reliance on aid has distorted what should be institutions and energy devoted to development. Instead of development agencies, we have aid agencies. Instead of pressure from the street for development, we have pressure for aid. The distortion of institutions and citizen pressure is self-perpetuating because it crowds out consideration of other approaches. (What, for example, do you imagine aid agencies lobby for?) Our utter neglect of trade, security and governance policies for the bottom billion is a scandal — and an opportunity. Properly used, these policies have real power, which is why they were employed for the recovery of Europe. Zoellick and others who care about world poverty have to learn how to use the full array of policies, rather than pretending that it can all be done with aid. Saving the bottom billion will also require the United States and Europe to work together. The emerging economies will need to do the same. To produce this unity of serious purpose, caring will not be enough: Goodness is in limited supply. Fortunately, it can be reinforced by the less morally demanding (and therefore better supplied) motivation of enlightened self-interest.”

I couldn’t agree more. We believe Development-in-a-Box is a better approach because it fundamentally relies on making an emerging market economy profitable — for everybody. Collier wonders, however, if our generation (and those that follow) will step up to the challenge.

“Moved as I am by the miseries of life at the bottom, I, too, have a self-interested stake here: I am fearful of the world that my 6-year-old son will inherit unless we wake up. The generation of Harry S. Truman and Dwight D. Eisenhower rose to the challenge of restoring Europe and gave us a safer world. Our own generation now has its own choice to
make: whether to face up to our responsibilities or, like the generation of the 1930s, to go into collective denial and sleepwalk into a nightmare. It isn’t just about Zoellick. In our democracies, politicians will ultimately do what we ask of them. It is our collective responsibility to grasp the challenge posed by the bottom billion — and, critically, to get up to speed with the issues to understand what can be done about it. Only then will our politicians move from gestures to serious, effective actions.”

I wrote a post about the desperate need for global leadership . Collier is making the same plea for leadership and vision that I have made. He is also calling for a groundswell of support that would motivate leaders to become more visionary.