Paul Collier’s comments on the bottom billion

So in the ten years since I wrote the Bottom Billion, what’s changed?

And the answer I think is: not enough. Now in one sense it’s been a good decade for the poorest countries, but I think that was largely because Four fortuitous things happened in quick Succession. If we just go through that, It started with debt relief which helped a lot because a lot of the poorest countries were very heavily indebted. Then and we got the commodity super cycle, a lot of them would commodity exporters and so the price of their exports rose a lot and that was a big help.

Because global commodity prices were high and resource extraction companies could raise a lot of money for prospecting for the first time in thirty plus years and the poorest countries with a sensible place to prospect because they were the least respected and so in addition to the price boom you got a quantity boom, more resources were discovered, and then finally after 2009 the world became awash with liquidity and for a while asset holders were willing to buy African sovereign debt at quite reasonable Prices. So those were the four favorable shocks Which hit a lot of poor countries over the last 10 years. Unfortunately, they’re all over. Debt relief won’t be on the agenda again for many many years. Commodity prices tanked.

Although many resources have been discovered, very often, the companies are no longer able to raise the money to finance the extraction and so the resources stay in the ground; and finally although the world still washed with Liquidity, because export prices have gone down because debts have accumulated again, people are not willing to lend to very poor countries except on prohibitive terms. So all the four good bits of news, are over. So where that leaves us is many poor countries are no longer doing very well. If we take to the end of 2016 which is when i’m recording this, this year the per capita growth in gdp for Africa and is actually negative negative one-point-six percent.

So that’s a very serious matter. It means that growth in Africa has to be turned around and turned around pretty rapidly. So that’s where we start, we’ve had a good decade, but the coming decade looks very much less promising. It’s a vital matter that Africa gets back to growth and Convergence. As I say this year it’s declining absolutely and so diverging from the rest of mankind very rapidly What can we do about that?

Times are tough, because the rich countries, most of them, are either in a new phase of meanness or are genuinely fiscally Stressed, so there isn’t a lot of extra public money around, and so the public money we’ve got for the poorest countries has to be made to work harder and that means using it to gear up private capital slopes. Africa as a region at the moment has a big capital outflow about 200 billion a year. The aid inflow is only half that and so there’s a big capital outflow from Africa.

Partly that is illicit capital flows such as money for corruption being hidden in secrecy havens around the world partly it’s through the miss-invoicing of especially of natural resource companies which means that profits are managed to be shifted from Africa where they should pay tax to tax havens and so trying to stop the capital outflow from Africa

really means two areas of global governance: One is the tax avoidance and the other is the dishonesty of being able to hide the true ownership of bank accounts. So those of you who are interested in

international campaigns those two areas: fair tax and transparency in the true ownership of assets, those would be very important areas to hit. Finally if I just return to the idea of using public money to gear up private capital I’m at moment advising the German Government, which is chair of the g20 and has a big Africa initiative and the centerpiece of that African initiative is indeed to try and use public money to incentivize reputable firms to make investments in poor countries where otherwise they wouldn’t go. That sound sounds like a complicated agenda, face reality it’s a really important agenda.

The ascent out of poverty will not be achieved just by small-scale village level activities it’s about poor countries breaking in to the modern economy and for that they need proper firms. Thanks very much.