Diamonds are a guerilla’s best friend: The last word on Development – for now

Well maybe not, but this review of what sounds like a great book is a great read.

The book is The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It. The author of the book is Paul Collier and the author of the review of it is Niall Fergusson.

Edited highlights over the fold.

There is indeed something faintly Victorian about Sachss messianic yet parsimonious conviction that Africa can be saved with $75 billion a year in Western aid. Having spent so much of his energies in the 1990s extolling the virtues of the free market to any Eastern European government that would listen, Sachs now argues with equally unshakable conviction that the elimination of African poverty can be achieved through state planning. All governments need do is improve agricultural technology, provide antimalaria bed nets, treat diseases like hookworm and distribute antiretroviral treatments to the H.I.V.-infected.

At times, he is rather reminiscent of Dickenss Mrs. Jellyby in Bleak House, a lady of very remarkable strength of character, who … has devoted herself to an extensive variety of public subjects, at various times, and is at present (until something else attracts her) devoted to the subject of Africa; with a view to the general cultivation of the coffee berry and the natives. In Easterlys 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. A former World Bank economist like Easterly, Collier shares his onetime colleagues aversion to what he calls the headless heart syndrome meaning the tendency of people in rich countries to approach Africas problems with more emotion than empirical evidence. It was Collier who pointed out that nearly two-fifths of Africas private wealth is held abroad, much of it in Swiss bank accounts. It was he who exposed the British charity Christian Aid for commissioning dubious Marxist research on free trade. And it was he 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. (He cites a recent survey that tracked money released by the Chad Ministry of Finance to help rural health clinics. Less than 1 percent reached the clinics.) Yet The Bottom Billion proves to be a far more constructive work than The White Mans Burden. Like Sachs, Collier believes rich countries really can do something for Africa. But it involves more much more than handouts. . . .

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, Collier points out, have recently been through, or are still in the midst of, a civil war. . . . Unfortunately, there is a vicious circle, because the poorer a country becomes, the more likely it is to succumb to civil war (halve the … income of the country and you double the risk of civil war is a characteristic Collier formulation). And once youve had one civil war, youre likely to have more: Half of all civil wars are postconflict relapses.

Why, aside from their poverty, have so many sub-Saharan countries become mired in internal conflict? Collier has spent years trying to answer this question, and his conclusions are central to this book. Civil war, it turns out, 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 guerrillas best friend, and a substantial part of this book concerns itself with what economists like to call the resource curse, his No. 2 trap. As he sees it, the real problem about being a poor country with mineral wealth, like Nigeria, is that resource rents make democracy malfunction; they give rise to a new law of the jungle of electoral competition … the survival of the fattest. Resource-rich countries dont need to levy taxes, so there is little pressure for government accountability, and hence fewer checks and balances.

Countries dont get to choose their resource endowment, of course; nor do they get to choose their location. Trap No. 3 is that landlocked countries are economically handicapped, because they are dependent on their neighbors transportation systems if they want to trade. Yet this is a minor handicap compared with Trap No. 4: bad governance. Collier has no time for those who still seek to blame Africas problems on European imperialists. As he puts it bluntly: President Robert Mugabe must take responsibility for the economic collapse in Zimbabwe since 1998, culminating in inflation of over 1,000 percent a year.

If these four things are the main causes of extreme poverty in Africa and elsewhere, what can the rich countries do? . . . Trade, . . . is not a sufficient answer. The problem is that Asia has eaten Africas lunch when it comes to exploiting low wage costs. Once manufacturing activity started to relocate to Asia, African economies simply got left behind. Now, to stand any chance of survival, African manufacturers need some temporary protection from Asian competition. So long as rich countries retain tariffs to shelter their own manufacturers from cut-price Asian imports, they should exempt products from bottom billion countries.

This, however, is not the most heretical of Colliers 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. . . . 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 the bottom billion, 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.

Although it stands on a foundation of painstaking quantitative research, The Bottom Billion is an elegant edifice: admirably succinct and pithily written. Few economists today can match Collier when it comes to one-liners. A flagrant grievance is to a rebel movement what an image is to a business. Calling the present trade negotiations a development round is like calling tomorrows trading on eBay a development round. And If Iraq is allowed to become another Somalia, with the cry Never intervene, the consequences will be as bad as Rwanda.

If Sachs seems too saintly and Easterly too cynical, then Collier is the authentic old Africa hand: he knows the terrain and has a keen ear. . . . 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 Theyre locked in ethnic hatreds, Go back to empire versus Respect their sovereignty, Support their armed struggles versus Prop up our allies. If youve ever found yourself on one side or the other of those arguments and who hasnt? then you simply must read this book.

An end to false dichotomies. You read about it first on Troppo.

This entry was posted in Economics and public policy, Politics - international. Bookmark the permalink.

5 Responses to Diamonds are a guerilla’s best friend: The last word on Development – for now

  1. swio says:

    Does the book mention the concept of “odious debts” ? (

    A system of international laws that properly defines odious debts and gives nation’s the right to show a debt to be odious and have it declared void would greatly weaken the power of corrupt African rulers.

    At the moment being the recognised head of state of a country, no matter how illegitimately, lets corrupt leaders turn a countries finances into their own personal credit card.

  2. Oz says:

    I would’ve thought that colonialism did play some part in drawing up the borders of African nations and thus who it included.

    Anyway it looks like an interesting read.

  3. Patrick says:

    Swio, I wonder if advocates of the doctrine of ‘odious debts’ imagine what a comprehensive piece of imperialism it would be? The concept behind the doctrine is not unreasonable, and the motives are excellent, but the actual idea would be one of the most fundamental assaults on poor-country sovereignty yet.

    Consider debt incurred to build an airport the majority of the profits of which go to cronies, or debt incurred to fund the purchase of services from crony companies, or debt incurred to fund the building of an elaborate palace, etc.

    In none of those cases would it be easy to call the debt ‘odious’ in the sense intended without invoking a comprehensive right of review over the executive (and probably parliament and judiciary at least by implication) of foreign countries, primarily, apparently, on the grounds of their poverty. The immediate effect would be less ready lending and on higher rates for poor countries.

    Oz, I suspect that the greatest impact of national boundaries in many African conflicts has been nomenclatural convenience for the West (ie this is a war of this country or that, this is ‘civil’ but not this). It is not evident that an artificial line on colonial maps would have prevented, eg, well any African conflict I can think of.

    NG – the book (and the review) looks like a very good read indeed. I’m buying a copy as a present for a friend. Unfortunately I am going to prioritise the Rugby world cup and won’t have time to read it myself for the moment :) Thanks for the post.

  4. swio says:

    “imagine what a comprehensive piece of imperialism it would be?”

    The imperialism is already there. Who decides which local leader gets access to a nation’s international credit card or can sign resource deals? The international community often decides by recognising a Head of State. If a corrupt African leader can convince western governments to recognise him then he, rather than the people of the country, decides how the nations credit is spent. There are plenty of cases of where a leader of little following in a country gets recognised as “the government” then uses the resources available to “the government” including international debt to wage and win an internal war that his victims will end up paying for. Odious debts try to reduce this subtle imperialismproblem..

    “In none of those cases would it be easy to call the debt odious”

    Actually its not very hard in practice. For a debt to be declared odious the debter nation itself has to prove it in court. That is the victims of an odious debt actually decide what they consider an odious debt.

    “invoking a comprehensive right of review over the executive (and probably parliament and judiciary at least by implication) of foreign countries, primarily, apparently, on the grounds of their poverty.”

    Not really. For a dictator to put his countries financial reserves into a personal bank account almost inevitably requires violation of domestic laws. If an international bank lent money to a country and then colluded or turned a blind eye while local laws were violated the debt can be declared odious while actually strengthening the significance of local laws and parliament. At any rate this is done all the time in extradition cases even between first world countries.

    “The immediate effect would be less ready lending and on higher rates for poor countries.”

    The effect would be to move money from risky corrput countries to less risky more honest countries. It might actually reduce rates for less corrput regimes. Either way the long term effect would be less civil wars as leaders would not have the money to fund them. Since civil wars are one of the major obstacles to development its a small price to pay.

  5. Patrick says:

    I think there is a difference between recognition of heads of state and ‘odious debt’. Recognition of heads of state is not very imperialistic – pretty much any semblance of an election will do, and indeed much less. It is also necessary to recognise heads of state by some means.

    With ‘odious debt’, there is an ongoing assessment of the ‘legitimacy’ of a given regime, effectively undoing, amongst other things, the benefit that comes from the relatively simple process of recognition (which benefits accrue to citizens as well – such as sovereign-priced debt, or some representation in international organisations).

    As for borrowed monies used to fund wars, I agree that this is ‘odious’ in pretty much all cases – but even then one can’t say ‘all’ cases. What if Bosnia had borrowed money to resist Serbia? And then there are much easier ways of skinning that cat – give victims redress in Western courts against the lenders, much as happens at present.

    Some of what you say highlights, I think, the difficulties:
    Actually its not very hard in practice.
    I wonder how much practice there has been. But I suspect practice would prove you right – hence the problem. You are not really, in practice, talking about the ‘victims’, but the successor government (incidentally, recognition helps here too – it gives a government standing to press claims such as these). It is not hard to imagine successor governments in Africa and Central America arguing more or less willy-nilly that their predecessor’s debts were ‘odious’.

    Also, the part about breaking local laws suggests a very restricted application of ‘odious debt’ indeed. It would not usuall cover, for example, any of the cases I listed above.

    Your final paragraph is also off-point. As is discussed in the review NG has posted, resources, not borrowings, are the source of most funding. Add to that now al-quaeda and similar organisations.

    I should note, however, that I am only cynical because I really think the idea stinks (hehe). I would happily support more ‘imperalism’, for example, in recognition of governments in the first place. For example, if one scrapped the UN and made it a condition of entry that you had either at least four successive non-violent changes of government or internationally supervised (and approved) elections.

    But not merely at increasing the cost of borrowing for all poor governments. I do note your point about only corrupt governments being affected, but really, what standard of transparency are you really imagining? The constant risk for all poor countries would be the successor government – who could be marxist guerillas – having a legitimate platform from which to challenge the debts of the predecessor. The mere prospect of the litigation (which would be very expensive) would drive up costs across the board, proportionate only to stability (as is already the main determinant of sovereign risk pricing).

Leave a Reply

Your email address will not be published. Required fields are marked *

Notify me of followup comments via e-mail. You can also subscribe without commenting.