Re-thinking Foreign Aid: Paul Collier’s The Bottom Billion and Dambisa Moyo’s Dead Aid

![Despite receiving billions of dollars in aid, Africa is still mired in poverty (George Osodi/AP Photo)](/content/uploads/Liberia.jpg)
Despite receiving billions of dollars in aid, Africa is still mired in poverty (George Osodi/AP Photo)
Former American slaves founded the African nation of Liberia in 1847. Just three years later, back in the United States, the territory of California joined the Union. Despite these proximate founding years, these territories’ trajectories could not be more different. Economists peg Liberia’s 2006 purchasing-power parity (PPP) gross domestic product (GDP), for instance, to be about $1.525 billion. Meanwhile, the 2007 PPP GDP of California alone is $1.7 trillion—an order of magnitude larger than the Liberian figure. Moreover, the United Nations Human Development Index, a conglomeration of development statistics such as literacy and infant mortality, ranks Liberia 176th out of 179 nations. California and the United States rank 15th.   California has soared economically, while Liberia remains in squalor. Why?   This enormous gap in economic performance between the West (Europe, the U.S.) and the rest (Africa, most of Asia and Latin America) is one of the most troubling and perplexing questions of the modern world. Since the Second World War, economists have feverishly studied the underdeveloped world, mapping out causes and potential solutions.   More recently, several schools of thought on development economics have emerged at opposing extremes. In the first camp are the so-called “Utopian” planners, led by economist Jeffrey Sachs of Columbia. In his famous 2005 book, The End of Poverty, Sachs audaciously wrote, “extreme poverty can be ended, not in the time of our grandchildren, but our time.” How does Sachs say we can do that? By pumping billions of dollars from the developed world into the underdeveloped world, washing away malaria, diarrhea deaths, and famine through a torrent of American greenbacks.    On the other side of the debate is William Easterly, an economist from NYU and former economist at the World Bank. In his book The White Man’s Burden, Easterly is contemptuous of the historical Western model for foreign aid. Despite billions of dollars having been spent over half a century, poverty is far from gone. In this paradigm, he argues, bureaucracy inevitably piles up, money is squandered, and in the end little progress is made. He is the consummate pessimist.

Now two serious new voices have entered the fray: Paul Collier, a Professor of Economics at Oxford and Director of the Center for the Study of African Economies, and Dambisa Moyo, a Zambian graduate of Harvard and Oxford and former economist at Goldman Sachs. Collier has successfully forged a middle ground between the optimism of Sachs and the pessimism of Easterly. Moyo, meanwhile, has staked out a remarkably gloomy position on foreign aid, displaying utter disdain for current aid models.

Professor Collier, who spoke in Stanford’s Annenberg Auditorium on February 11th about several of his new ideas on the issue of extreme poverty, released The Bottom Billion: Why the Poorest Countries are Failing and What We Can Do About It, last year to widespread acclaim. Its premise, like many of the best book premises, is simple: about 1 billion people remain mired in extreme poverty to this day because of four “traps” that must be dealt with. First, poverty stems from “the conflict trap”—civil wars that drain national resources, as has occurred in Liberia. Second, poor countries tend to suffer from “the natural resource trap”—dependence on certain resources (minerals, oil) that actually stifle economic growth (This is similar to the “resource curse” developed by Stanford Professor Terry Karl.) Third, poor nations are typically “landlocked with bad neighbors”—no ports and bad neighbors means no trading, as Laos has learned first-hand. Finally, most of these countries are small and suffer from poor governance; a small government with bad policies can quickly obliterate an economy, as has been the case in Sierra Leone. The portions of the book that describe the suffering and squalor of the fifty nations (swaths of Asia and much of sub-Saharan Africa) is empathetic and well-written. Indeed, his compassion is his best quality.

The Bottom Billion astutely diagnoses the reasons for the persistence of extreme poverty. However, its recommendations for solving these problems are less praiseworthy. The central assumption of the book is that internal solutions to these crises are not possible, and an external, i.e. Western, solution must come to the rescue. He proposes four plans of attack, each of which is difficult to implement and is rather broad. To address the issue of civil wars and coups, Collier proposes selective Western intervention, such as the pressure applied by the U.S. against Charles Taylor in Liberia in 2003. Aid agencies, he also proposes, must start in the countries with the worst conditions, regardless of the risk involved, and work up from there. Next, he wants to see greater use of international charters, deals, and agreements in promoting good governance. Finally, rich nations like the U.S. should give preferential treatment to exports from extremely poor nations. For this problem, he blames anti-globalization, pro-tariff pressure groups in the U.S.

As Professor Easterly points out in his “New York Review of Books” review of Collier’s book, Professor Collier emphasizes Western military intervention to decrease internal violence in the poorest nations. This proposal, while well-intentioned, seems to be far from the smoking gun that Collier makes it out to be. As Iraq and Afghanistan have shown, military intervention and the resulting nation-building are far from easy affairs. They could serve as temporary solutions, but can they possibly be a long-term solution? The other proposed solutions are pragmatic enough but none of them are revolutionary. Instead, Collier diagnoses particular medicines based on his particular diagnoses.

Dambisa Moyo, on the other hand, calls for the West to scrap its foreign aid program entirely, as it has only exacerbated African poverty. In her book, Dead Aid, whose foreword was penned by famous economic historian Niall Ferguson, Moyo argues that the nearly $2 trillion spent over several decades has done little more than fill the coffers of corrupt regimes. Indeed, despite all the Western money pumped into Africa, for example, a large portion of the population still lives on under a dollar per day. Clearly, poverty eradication is not as simple as it may seem.

On the other hand, Moyo’s criticism comes too easily as well. She paints her picture with broad, flat strokes, overlooking the maddening complexities that define the situation. She, for instance, omits any specifics of aid allocation, simply dismissing all aid as corrupt and useless.

Her proposals, all unrelentingly pro-free market, are a welcome addition to the conversation, but come off as a bit tin-eared. These prescriptions—government bonds, more microfinance—stand to gain little traction in the current economic climate.

In the end, of the two books, Collier’s is more satisfying. He has digested the contradictions, irrationalities, and complexities of extreme poverty and offered deceptively simple solutions to one of the world’s most intractable problems. Moyo’s general thrust is welcomed, but her research lacks nuance and leaves the reader wanting more substantive recommendations.

Maybe with a combination of the two philosophies, Liberia will be closer to California sooner than we think.

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