The Foreign Service Journal, April 2008

A P R I L 2 0 0 8 / F O R E I G N S E R V I C E J O U R N A L 49 The Four Poverty Traps The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It Paul Collier, Oxford University Press, 2007, $28.00, hardcover, 205 pages. R EVIEWED BY L ADD C ONNELL Development has long been a key goal for U.S foreign policy; the ques- tion has been how to do it. Why do the standard policy prescriptions seem to work in some instances and not in others? What can we do for those that are failing? Paul Collier, author of The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It , has come up with convincing explana- tions and answers. An economics professor at Oxford University and a former World Bank economist, Collier has spent much of his life working on the problem of why some countries are developing and oth- ers are not. He finds that the failing states—some 50 countries with rough- ly a billion people—are stuck in one or more of the following four poverty traps: conflict (usually civil war), depen- dence on natural resource exports, landlocked borders (made worse by bad neighbors), and poor governance (particularly in a small country). The conflict trap seems obvious, but Collier quantifies the damage: a typical civil war lasts seven years and costs a country 15 percent of its gross domestic product. And once they have been through such a war, coun- tries are twice as likely to have anoth- er. Indeed, this is overwhelmingly the common characteristic of the poorest nations: nearly three-quarters of the people in the bottom billion have recently been through, or are still in the midst of, a civil war. Collier provides insightful analysis of the other traps as well, but even more useful is his analysis of what to do about them. Unlike other promi- nent development economists like Jeffrey Sachs, who claims that adding $75 billion a year in aid flows will solve all development problems, or William Easterly, who asserts that for- eign assistance is worthless and often counterproductive, Collier takes a more nuanced approach. He recog- nizes that aid may fail, but says this is worth the risk in failing states. At the same time, he warns that post-conflict aid is often “too little, too soon.” Countries are not able to absorb the assistance in the immedi- ate aftermath of conflict, but need help to be sustained for a decade or more as they work to rebuild infra- structure and institutions. Collier also recommends that donors support incipient reforms in resource-rich and badly governed countries (with govern- ance conditionality) and improve trans- port links for the landlocked. Collier offers similarly detailed advice for the other development tools. While trade has been great for developing Asian economies that have specialized in labor-intensive manu- factures, the resource needs of those economies and the competition from them (e.g., China) make it more diffi- cult for the bottom-billion countries to follow the same route. Accordingly, he advocates trade preferences (zero tariffs) for those nations so they can, at least, get on the bottom rung of the manufactured exports bandwagon. To support private investment, Collier urges the adoption of laws that provide for international arbitration of disputes and international investment insurance. He also praises interna- tional charters, akin to the Extractive Industries Transparency Initiative (which sets a global standard for com- panies to publish what they pay and for governments to disclose what they receive), across the full range of gov- ernance activities. Perhaps his most controversial rec- ommendations relate to military inter- vention. Given the high development B OOKS Mindful of the high development costs of wars, Collier promotes an activist approach to conflict prevention.