This book argues the real challenge of development is the small group of countries that are falling behind and often falling apart. These countries, and the billion people who live in them, are caught in one or another of four traps: the conflict trap; the natural resources trap; the trap of being landlocked with bad neighbours; and the trap of bad governance in a small country. These traps are not inescapable, but standard solutions will not work. Aid has been ineffective, and globalisation has made things worse. A new mix of policy instruments is required, supported by a bold new plan of action for the G8.
While 5 billion people live in countries that are developing, one billion people live in a small group of countries – concentrated in Africa and Central Asia but with a scattering elsewhere – that are stuck at the bottom. The central problem of these ‘bottom billion’ countries is that they have not grown – their growth rates has been negative in absolute terms, and in relative terms massively below the rest of the developing world. These countries are caught in one or another of the following traps, which have kept them stagnant:
- The conflict trap: Seventy-three per cent of people in these countries have recently been through civil war or are still in one. Some of them are stuck in patterns of violent political conflict in the form of internal challenges to government. Wars and coups keep low-income countries from growing, and dependent on primary commodity exports. Because they stay poor, stagnant and dependent on primary commodities, they are in turn more prone to wars and coups.
- The natural resource trap: Twenty-nine per cent of the bottom billion are countries in which resource wealth dominates the economy. A low-income, resource rich society is likely to become an autocracy or lopsided democracy with no checks and balances, and is in turn unlikely to grow. This closes off the possibility of building a more balanced democracy through a process of economic development.
- Landlocked with bad neighbours: Thirty-eight per cent of the bottom billion are in landlocked countries. Resource-scare, landlocked countries whose neighbors either do not have growth opportunities or do not take them, are condemned to the slow lane because they do not benefit from any spill over effects of growth.
- Bad governance in a small country: Good governance and policy help a country to realise its opportunities, but they cannot generate opportunities for growth where none exist. Bad governance is not a trap; preconditions for turnaround include a large population, a high proportion of people with secondary education, and having recently emerged from war.
Trade is more likely to lock these countries into natural resource dependence than to open new opportunities, and the international mobility of capital and skilled workers is more likely to bleed them of their capital and talent than provide an engine of growth.
The problems of the bottom billion are serious, but fixable. Change will have to come from within, but external actors can use a range of policy instruments to encourage steps towards change:
- Aid: Aid is part of the solution, not part of the problem. It should be increasingly concentrated in the most difficult environments. Aid agencies will need to accept more risk and a higher rate of failure. Agencies should finance big-push strategies for export diversification, and introduce governance conditionality. To make development policy coherant will require a “whole of government” approach. Addressing the problem of the bottom billion is an ideal topic for the G8.
- Military intervention: Appropriate miltary intervention, such as the British in Sierra Leone, has an important place in helping the bottom billion, particularly in protecting democratic governments from coups.
- Laws and charters: We should adopt international charters for: natural resources; democracy; budget transparency; post-conflict situations, and; investment.
- Trade policy: The bottom billion need to diversify their exports, and they need temporary protection from Asia.
