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What poverty remedies can the West provide to developing nations? What mistakes do Western countries often make when trying to provide aid?
In his book The Bottom Billion, economist Paul Collier proposes four ways the West can assist poor nations. His suggestions are foreign aid, military intervention, laws and charters, and trade policies.
Let’s look at each one of Collier’s poverty remedies in detail.
Remedies for the Bottom Billion
Having explained the four factors that trap the bottom billion in poverty, Collier then discusses four poverty remedies he believes the West and poor nations can apply to break those poverty traps.
(Shortform note: Collier doesn’t emphasize political reforms as strongly as other scholars. He also believes in refocusing on economic growth, rather than on more “photogenic” social priorities like holding elections and increasing school enrollment.)
Remedy #1: Foreign Aid
The first poverty remedy Collier examines is foreign aid, which he argues can be useful to spurring growth among bottom billion economies under the right circumstances. Among poor nations, Collier estimates that foreign aid adds about a percentage point to annual GDP. For many nations, receiving foreign aid in any amount prevents their living standards from getting worse. However, Collier believes that aid can go further when it’s used intentionally.
In Collier’s view, most traditional approaches to foreign aid focus on a “one size fits all” strategy of providing aid to all extremely poor nations. Collier believes this strategy fails to consider how foreign aid interacts differently with each poverty trap. He tailors his foreign aid strategy to account for the disparate impact these traps have on the effectiveness of the aid. In this section, we’ll explain the traditional approaches of using foreign aid, then explain how Collier’s approach would differ.
Aid and Conflict
Traditional approach: Collier’s own analysis suggests roughly 11% of traditional foreign aid winds up funding the recipient country’s military, and that 40% of Africa’s total military budget comes from aid. Collier says that foreign aid does not increase the chance of civil war, but it does slightly increase the risk of a coup in conflict-prone countries—presumably because the foreign aid boosts the government revenue that bad actors want to appropriate.
Collier’s approach: Collier argues that aid to conflict-prone regions needs to be disbursed with caution. Aid earmarked for specific projects or aid in the form of technical assistance may be more appropriate for conflict-prone countries.
Aid and Natural Resources
Traditional approach: Collier finds that aid isn’t very useful for nations that have an abundance of natural resources. In these places, aid acts similarly to revenue from resource rents (the difference between the price of a commodity and the average cost of producing it), and two things can happen: Bad decision makers waste the revenue, or they experience Dutch disease.
Collier’s approach: He argues that rather than receiving foreign aid, resource-rich nations are better off focusing on reforming laws and charters (which Collier discusses as his third poverty remedy) and crafting better trade policy.
Aid for the Landlocked
Traditional approach: Because of the unique challenges they face, foreign aid is typically a big priority for landlocked nations. Collier agrees that foreign aid is vital to landlocked nations to increase consumption and improve basic living conditions.
Collier’s approach: To spur broader economic development, Collier urges these nations to use the aid on transportation infrastructure, which will help address landlocked nations’ difficulty accessing trade markets, in addition to humanitarian objectives.
Aid and Bad GovernanceTraditional approach: Another failed strategy is aid that is contingent upon policy. To Collier, forcing countries to adopt policies they would otherwise reject usually fails. This is because aid “conditionality” is based on agreements, not follow-through.
Collier’s approach: Collier admits bad governance makes foreign aid largely ineffective. Therefore, he says foreign aid for the worst governments is unwise, and the West needs to focus on the other remedies (laws and charters and trade policy).
While Collier doesn’t support forced policy changes as a condition of aid, he does advocate “governance conditionality,” which links aid to achieved improvements in governance.
Collier suggests a strategy for when poorly governed states show improvement:
- Provide technical assistance (trained foreigners with expertise) as soon as there are signs of reform.
- Provide monetary assistance once recipients are better governed and better equipped to use it properly. Providing monetary aid too soon is a mistake, because it’s often misused during government transitions.
Remedy #2: Military Intervention
Next, Collier argues that military intervention is an important tool for Western governments to prevent violence in susceptible nations. Although these interventions are controversial, Collier argues that when done properly, the benefits substantially outweigh the costs. When Western nations dismiss the option entirely, the results can be catastrophic.
Collier says military interventions serve three functions:
- Restoring order
- Keeping the peace
- Insuring against coups
Restoring Order
According to Collier, Western governments have an obligation to intervene in failing states lacking a functioning government. There is, of course, a risk to Western troops tasked with restoring order. However, Collier believes the costs of not intervening are far greater, both to the bottom billion, who languish in disorder, and to Western nations that face the repercussions of terrorism and epidemics that arise from the chaos.
Collier highlights Somalia, a case where a sustained military intervention would have worked well. Instead, the American military intervened in 1993 when the government collapsed, but then withdrew after negative public reaction to 18 American casualties. By 1995, there were 300,000 Somali casualties. When Collier’s book was published in 2007, Somalia was still without a functioning government. Additionally, Somali refugees have gone on to commit acts of terror in the West.
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Like what you just read? Read the rest of the world's best book summary and analysis of Paul Collier's "The Bottom Billion" at Shortform .
Here's what you'll find in our full The Bottom Billion summary :
- How development aid programs pay too little attention to struggling countries
- A look at the four poverty traps, and the four remedies for them
- How conditions for the bottom billion are changing
