Paul Collier, fully Sir Paul Collier

Collier, fully Sir Paul Collier

Professor of Economics and Public Policy at the Blavatnik School of Government, Director for the Centre for the Study of African Economies at the University of Oxford, Director of the Development Research Group of the World Bank

Author Quotes

Only with a matching increase in demand are exporters not disadvantaged by the extra aid.

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.

The aid agencies are not run by fools. they are full of intelligent people severely constrained by what public opinion permits.

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 mis-governance.

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.

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. But because of the trace elements found in oil, its origin is detectable, and so certification could be effective.

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 go into a storage tank, one thousand barrels of the oil that comes out could be designated as being from Angola. If consumers refused to buy gasoline ?from? Angola, the companies would be reluctant to put it into the storage tanks in the first place. Angolan oil would become harder to sell, except at a discount, and this would create a financial incentive for the Angolan government to be transparent.

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.

Operation Palliser was brilliant, and the British army can be proud of its contribution to the development of Sierra Leone. It also serves as a model for military intervention in the bottom billion: cheap, confident, and sustained. It was welcome, too ? the people of the country were truly thankful. Yet it is completely uncelebrated. Instead, reverberating in the newspaper headlines each day is Iraq. As with Somalia, the apparent lesson from Iraq is to never intervene.

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.

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.

The great commercial game in bottom-billion societies has been to bribe your way into lucrative contract.

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.

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.

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.

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.

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.

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.

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.

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.

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.

Dependence upon primary commodity exports ? oil, diamonds, and the like ? substantially increases the risk of civil war.

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 greater inclusion in power in return for adherence to international standards. It has to be made in China?s interests for the bottom billion to develop rather than to fall apart.

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.

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.

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Collier, fully Sir Paul Collier
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Professor of Economics and Public Policy at the Blavatnik School of Government, Director for the Centre for the Study of African Economies at the University of Oxford, Director of the Development Research Group of the World Bank