Article first published on Blogcritics
There’s an assumption underlying The Plundered Planet that left me astonished at Paul Collier’s hubris, and amazed that the author felt no need, whatsoever, not a jot, to justify it. He spells it out simply: “in all probability the distant future will be very much richer than we are”. I’d love to be able to question him, to ask how he can be so certainty that huge material “progress” – seen at most over only a couple of centuries, in a few small parts of the world – will continue?
It’s a pity, for the author of The Bottom Billion has a lot of interesting things to say in his latest book, which is chiefly concerned with the ways, both philosophical and practical, developing states should exploit their resources – particularly mineral resources. (He’s also concerned about climate change and making decisions for the future about that.) There’s a lot of sense in it, a lot of human concern, and very reasonable concern about the future.
The basic premise that he sets out is that no resources should be exploited unless the decisionmaker can be confident that the resources generated as a result will be more valuable to the future than leaving the original material in the ground. The chief concern here, as in his previous book, is developing states, and particularly with exploring what’s gone wrong in states suffering the “resource curse”, and in the few rare examples, such as Botswana, where it hasn’t applied.
He begins by explaining just how little is actually known about the resources of developing states, particularly in Africa. Collier gives the example of Zambia – the most recent geological surveys date back to the 1950s, and there’s never been a mineral discovery further than 10 miles from a major road. The answer, he suggests, is — setting out the reasons why auctioning or selling something when you can have no real idea of its value — aid projects financing surveys, a pretty radical idea for the aid community to swallow. And then you’ve got the problem of how to sell what you’ve got, when you know it is there…
Collier notes that China is the only source now offering free surveys. In fact he’s very counter-current on China, not viewing the increasingly influential state through rose-coloured glasses, but particularly interested in the way China is purchasing the rights to resource extraction in return for the construction of infrastructure. He says these deals are traditionally hated, since they are wholly opaque, with no idea of real value being recorded. But, having suggested that the vast bulk of revenue from natural resources should be invested for the future, this might be a way to do it.
“Any prudent Minister of Finance …might justifiably be afraid of being but one voice in favor of spending much of the money on infrastructure. Across the table, the Minister of Defense might argue now was the time to raise army salaries. He might mention that there had been disaffection in the ranks and look meaningfully at the President. The Minister of Education would interject that the teachers unions were fully aware that extra money had flowed into the budget and planning a strike. In short, the Minister of Finance might reasonably fear that the bulk of the money would dribble away on extra recurrent spending. Compared with that outcome, the Chinese deal might look rather attractive. There would be no extra money to carve up at the cabinet table: the offer was for infrastructure. The investment rate out of the implicity revenues would therefore be 100 percent.”
The problem is now – as with internal investment – transparency of the value of what’s offered. The argument runs – and certainly seems to me to have veracity – that capital investments come broadly in two parts – equipment (eg trucks) and structures (eg roads). The former generally have to be imported in developing states so the price paid can, with even very limited scrutiny, judged against world prices, so if wildly inflated by corruption it is obvious. But the structures have to be built in-situ, and in greatly varying conditions, so it is difficult to tell if costs have been hugely inflated by corruption (or indeed simply been underbid by the Chinese). The alternative would be to open the same process to competition – offer the best infrastructure to win the right to the resources. “Instead of accusing the Chinese of plundering Africa, it might have been more effective of the international community to imitate them.”
But how to decide which infrastructure to plump for? That’s also wide open to corruption. (And not only in notable “corrupt” places – as a young journalist in rural Australia locals were always telling me about how the roads outside councillors’ houses were always remarkably smooth.) Collier says that cost-benefit analysis, the traditional route, makes too many demands on the human resources of most developing world bureaucracies; is simply unrealistic. Instead he makes a simple, practical proposal, choosing some successful middle-income country, Malaysia or Botswana for example, as a model, and broadly following its investment model.
He does, however, make one prescription, and in a place where his narrow economist lens starts again to look very limited: that investment should be concentrated in cities, and preferably big cities. “Each time a city doubles in population, the productivity of its workers increases by around 6 percent.” Fine, and probably true, so far as it goes, but if you concentrate investment there, how is the agricultural hinterland going to keep the city fed? (Although again Nigeria provides an example of how things can go badly wrong – in a political carve-up Lagos, its largest city, was left without any oil revenue at all.)
read more »
About