The Bottom Billion

To start our research on Nepal and other countries in poverty, Dakota and I read The Bottom Billion, authored by Paul Collier.  The term “bottom billion” refers to the billion people that populate the poorest countries in the world.  The book describes the problems faced by the poorest countries of the world and offers a few possible solutions.  There are four main “traps” that Collier suggests are keeping the poorest countries’ economies stagnant.  The four traps are: being in conflict, dependent on a natural resource, landlocked with bad neighbors, and having bad governance in a small country.  Many of the problems faced by Nepal are mentioned in the explanations of these traps.

The landlocked with bad neighbors is one of the more interesting traps.  38% of the billion people that populate the poorest countries in the world live in landlocked countries.  Nepal is among these countries, landlocked between India and China.  China and India have strong economies, and Nepal needs to find a way to make some of their growth spill over.  Part of the problem for Nepal and other landlocked countries comes from the difficulty to trade.  Coastal countries naturally have more potential to trade because of their access to the sea.  It is much more difficult for countries like Nepal, because their access to the sea is dependent upon the transport infrastructure and policies of their country and neighbors.  In many of the poorest countries of the world, the neighbors make it nearly impossible to have a good trade system.  One point Collier brought up is that the most reliable driver of rapid development has been manufacturing.  But with poor transport to the coast, the manufacturing market is tough to join.  The terrain of Nepal makes it incredibly difficult to create the reliable transportation system essential for international trade.  Some of the solutions to the landlocked trap are to capitalize off of neighbors’ growth, improve access to the coast, and attract aid.  

Another one of the traps that can apply to Nepal is having bad governance in a small country.  In recent years, Nepal has had trouble with establishing a stable government.  From 1996 to 2006 there was a constant struggle between the government and the Maoist Party in Nepal.  Collier worked with other economists and looked at the probability of a turnaround for the poorest countries in the world plagued with unstable governments.  The probability turned out to be only 1.6%.  From that probability, they found that the average time it takes for one of these countries to escape being a “failing state” is 59 years.  The process takes so long because a country can start to grow again and easily collapse and revert back to one of the traps.  Even when times look promising, falling back in a trap can happen so easily that a true economic turnaround is challenging. 

Collier believes that aid, combined with other solutions, can do a lot to help the bottom billion.  Aid should come in different forms, like technical assistance that works to get skilled workers into impoverished countries.  Aid does have limitations though.  To make aid work a country needs to reform as well.  Reformers are usually unpopular in some of the poorer countries, but change needs to take place in the form of new laws, charters, and trade policies to truly improve a struggling economy.

Collier brought up many interesting points in his book.  He made the task of turning around a failing economy seem daunting, and rightfully so.  But Collier does suggest that it is possible as long as the right measures are taken.