Monday, August 28, 2006

Collier on Africa

The Wall Street Journal's Washington Wire, reporting from the Fed's Jackson Hole conference, suggests that Paul Collier is unlikely to be invited to join the new Sachs administration:

Paul Collier of Oxford University made a persuasive case that nowhere more than in Africa has geography undermined economic progress. Statistically, a country’s growth is more likely to lag if it is landlocked, resource-poor or small, and Africa, which is divided into over 40 countries, has an unusually large number of countries that are all three.

Many African countries are resource rich but are unable to efficiently spend those resources because, while democratic, they lack effective checks and balances. By contrast, countries that must rely on taxes are more likely to face demands for accountability. African countries, despite being small, are also ethnically diverse. The more diverse a society, the smaller the share of the population represented by the ruling group, he notes. “A minority in power has an incentive to distribute to itself at the expense of the public good of national economic

Finally, he says, Africa has missed the globalization boat: at the time Asia was opening up to foreign investment, Africa was saddled with overvalued currencies, civil war, experiments with socialism, or apartheid. Almost all these problems have been solved, but in the meantime Asia has acquired a formidable critical mass of local skills and infrastructure that make it difficult for Africa to compete for foreign investment....

“African performance has been far worse than that of any other region,” Mr. Collier has written. “The explanation for this is not that African economic behavior is fundamentally different from elsewhere, but rather that African geographic endowments are distinctive.”

He sharply disagreed with economist-celebrity Jeffrey Sachs’s view that disease and climate are the principal reasons for Africa’s underdevelopment. Sachs, he said, is “barking up the wrong tree.”