Paul Collier is the author of "The Bottom Billion," an award-winning book that shines a light on some 50 failing states in the world and the billion people who live in them. He recently told AllAfrica's Cindy Shiner that changes need to be made in the way foreign aid is given to these countries, and that how donors give money is more important than how much they give. Collier is also a professor of economics at Oxford University in the United Kingdom and is the director of the university's Centre for the Study of African Economics.
In The Bottom Billion you say that far too much aid to Africa is tailored to suit the interests of the donors, rather than the welfare of the recipients. Can you elaborate on this?
I think there are many motives that donors have in providing aid [which are] political. For example, if a country gets a temporary seat on the Security Council, its aid goes up, that sort of thing. Aid is to buy influence rather than have an effect in the country.
Some aid is what I call gesture politics. It's designed to go down well with the donors' domestic population but it just has to look good, it doesn't have to be effective.
And then of course some aid really does the job it's meant to do and really helps to develop the country. So aid is given for an odd mixture of motives.
Over the past four or five decades that aid has been given in substantial amounts, have lessons been learned? And if not, is it because people in donor countries aren't paying attention?
Aid has changed and I think to an extent it is getting better. Until the end of the Cold War aid couldn't get started because it was so heavily motivated by political consideration. Since the fall of the Soviet Union, we've [been in] a learning period.
But the reason you cited, I think, is an accurate one. That is to say, whilst the citizens of developed countries, the donor countries, are not up to speed on the issues, then politicians delivering aid will play to gestures that look good rather than to the more structural uses of aid that would be effective to ignite a growth process.
Unsophisticated audiences in developed countries are at the heart of the problem because those are the constituencies that aid donors actually care about. They're the voters who are paying for all of this.
I wrote The Bottom Billion because I realized it was necessary to build a critical mass of more informed citizens in developed countries. I think that is starting to happen.
In which ways do you see things changing?
[Recently] the British government brought out a new white paper on development. Its Department for International Development (DFID) is a pretty good aid agency by the standard of aid agencies.
What they announced in their white paper was that they're shifting resources to focus on what they call fragile states, which are the poorest and most troubled and most stagnant societies. That's been a trend in the last few years - greater attention to fragile states.
Donors need a different way of doing business in fragile states from the way they do business with, say, the Ghanas, the Tanzanias, the governments that are well intentioned and reasonably confident. And so donors are just starting to face the reality that they need to have a radically different approach to providing aid in fragile states like Liberia and Sierra Leone.
The core problems of the future are going to be making development work in those places. That's a case where there's learning going on, and it's uncomfortable because in the Tanzanias and Ghanas of this world the aid relationship can be pretty easy. Basically it's sensible just to hand over the money to the government and let the government spend it.
But you'd be crazy to do that in a fragile state and so coming up with modalities that are effective in fragile states requires that donors face reality, and the reality is often pretty uncomfortable.
Hasn't aid to Ghana and Tanzania to some extent been different to aid to Sierra Leone and Liberia already, such as the difference between development aid and emergency aid?
It's been different in amount more than it's been different in modality.
In a way, making it different in amount, giving more to Ghana and Tanzania and less to the fragile states, isn't the right answer because the fragile states in the end do need a lot of money. We need to move from differentiating by the amounts we give to differentiating by the modalities with which the money is spent in fragile states.
So what would the difference be?
The money that's given to governments at the moment - the same modalities are used, which is called budget support which means giving money to the government and let the government decide how to spend it.
In situations like Ghana and Tanzania that's a pretty good way of doing aid, I think, because generally a decent government has a better idea of what people want, how to spend money well, than a donor does. And budget support is consistent with building accountability to citizens rather than insisting on accountability to donors.
The European countries also do budget support in fragile states and that I think is a big mistake. It's true that governments in fragile states need money but the rationale is not budget support, it's life support.
In those contexts if governments get no money the place will fall apart.
Where money is transferred into the budgets of governments of fragile states, it needs to come with a lot of accountancy expertise that will ensure that it is properly spent. Without that technical support, providing money to the central budget is not just a waste, it's much worse. It's being captured by the very politicians and corrupt officials who are the core of the problem.
So you're saying send technical support from the donor countries to help with the transition?
That's right. I'll give you a practical example. The Somali government has contracted with PricewaterhouseCoopers, the accountants, to provide just such expertise, to provide all of the accountancy services for ensuring that aid money in Somalia is properly spent. The Somali government that did that because the donors finally required it.
The donors should be requiring that as a matter of course everywhere in fragile states and not just belatedly in an extreme situation in Somalia. That's an example where you've got to face reality. The donors have been slow to do it but they are starting to do it.
Another example of how things need to be done differently in fragile states is the design of the delivery of basic social services - health and education. The model that the European donors have had for a long time has been similar to the recreation of the Europe of the 1950s: strong, centralized ministries for social provision - a ministry of health, a ministry of education - doing everything top down. It's a state monopoly of supply and in fragile states that's crazy.
The actual delivery on the ground of social services needs to be done by whatever works - NGOs, churches, the private sector, whatever works and that provision needs to be financed by public money. Now at the moment that often happens but in a very chaotic manner in which individual donors finance individual pet NGOs. So NGOs are never put on a level playing field and made accountable for their money in a competitive system.
What do you think would work better?
The institutional architecture I want to see, I call independent service authorities. It is an institutional framework in which money is allocated through an agency which is co-run by the government and the donors but which basically monitors and assesses the performance of the retail deliverers.
It assigns money on the basis that the more effective deliverers get increased budgets and the less effective deliverers get reduced budgets.
You use NGOs, the private sector, whatever works, but all of that provision is subject to scrutiny and accountability. So an NGO would get its money not by going and lobbying USAID [for example] but by demonstrating that it's performing more effectively than competitor NGOs.
So those are two examples of very differentiated approaches in fragile states from the better-governed countries and the donors are edging towards that thinking.
What is the impetus for this rethink? Do you think it is because the Cold War has ended and the focus has changed? Has the global economic crisis has had an influence?
I think it's two things. It's the realization that cracking situations like Afghanistan means getting a realistic strategy for fragile states.
Afghanistan has been a big impetus for change, to the recognition that the future priorities, both for poverty and security, are going to be the fragile states and that happy talk just doesn't work in these environments.
The other impetus, as you say, is the global recession. It means that spending public money has got more serious, so the hard questions have to be asked and answered. There's a new seriousness of purpose.
You have said that it's vital to choose the right moment to provide aid. What lessons can be learned from the past to assure that development in Africa is done more efficiently and effectively?
Partly the answer is what I said before, that we need much more differentiated strategies. And there's a more general point, which is we need to fuss less about what aid is used for and more about how aid is spent.
We shouldn't be telling African governments what they should be spending their money on. They need to be accountable to their own citizens for that, not to us. But we should be insisting on how it is spent, which is to say budget systems have to have integrity and transparency so that citizens within these countries can see not just how aid is spent but how the whole budget is spent.
It's moving from what I'd call policy conditionality, which I think has been pretty dysfunctional, trying to tell African governments what policies to adopt, to what I call governance conditionality, insisting that African governments are transparent and accountable to their own citizens.
We've edged towards that but it's been an uncomfortable shuffle, and we need to back away from the policy conditions and move more sharply towards the governance conditions.
Dambisa Moyo, a former student of yours, in her book Dead Aid advocates cutting foreign aid in favor of greater trade and investment.
First, I think Dambisa is pointing to some really important issues so I think it's healthy that she's saying the things she's saying. I think she over-glamorizes the role of private international finance. Actually, private international finance has a pretty terrible record in Africa.
It was, after all, private international banks that lent billions to Nigeria during the most egregious period of corruption and saddled the next generation of Nigerians with commercial debt. Everyone could see that the money was being squandered, being looted by a bunch of corrupt politicians, so the historic record of the international banks is in many respects a lot worse than the historic record of the aid agencies.
And just at the moment syndicated lending to developing countries as a whole is down during the recession by about 20 percent, but to Africa it's down by about 98 percent. So the idea that Africa can safely rely upon private international finance seems to me to be pretty quixotic.
Now is the hour for public finance.
But, of course, Africans will need both public and private finance for a long time because it's so desperately capital-short. So I think the question is more how public capital flows can be provided in a way that is consistent with strengthening governance rather than the strategy of cutting international public finance off as a way of strengthening governance.
After all, for many years Nigeria got no public international finance at all worth speaking of, yet this didn't provide a discipline at all. So I think it's not the volume of aid so much as the modalities that are really important to get right.
How do you think trade and investment must change in order to benefit Africans, and then perhaps reduce dependence on foreign aid?
I think aid is part of the solution but I think it's not a major part of the solution. There are many other policy areas where we can make a bigger contribution. One of them is trade policy.
I believe that it's very important for Africa to diversify away from just primary commodities. Africa needs to industrialize. And with the growing population and deteriorating climate I think it's very important that it develops big coastal cities which are integrated into the world economy.
Now getting that process started is difficult given that China is so well established. Where our trade policy can be really useful both in America and Europe is to give Africa effective, privileged market access, privileged relative to Asia in order to get industrial clusters started in Africa.
Because there are no clusters, the odd firm that sets up cannot be competitive. But we won't get clusters until firms set up. So we need to break that chicken-and-egg problem with a period of privileged market access.
AGOA, the [U.S.] African Growth and Opportunity Act, [introduced] the right spirit and has been, I think, quite effective, at least in garments, which is the one area where the rules of origin have been got right.
Europe did have a privileged access scheme called Everything but Arms, which didn't work at all because the devil with any trade deal is in the detail and the rules of origin in Everything but Arms were hopelessly wrong. Europe's got a second chance to get things right in the negotiation of the Economic Partnership Agreements and there's some evidence that things are going rather better but there's still a long way to go.
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How can developed nations help Africa further with privileged and market access?
What we really need is not a European scheme and an American scheme but a common global scheme, which gives the latecomers to industrialization a period of privileged market access. We haven't got that in place.
It's important that AGOA stays focused on Africa. Once established producers in Asia are let inside a privileged market access scheme they'll be the ones who benefit, because the key concept is a pump priming approach to get the late entrants to industrialization started.
Asia has already got established producers, for example Bangladesh.
So the defining feature is not how poor a country is, but whether it has already broken into industrialization in a big way or not. That's why AGOA was broadly right in its conception. One way for Europe to go forward would just be to align [with] AGOA and do the same and then you wouldn't in effect have different schemes. It's crazy to have different rules or different schemes and then expect African producers to master these different intricacies.
When it comes to food aid and food production, bearing in mind the recent agriculture push at the G8, what does this all mean for the foreign aid effort and getting Africa to produce its own food?
I think the key thing that both America and Europe can do there is to recognize that it's vital we don't repeat the world food crisis of 2008.
It was caused not by a failure of African food supply [but] by a failure of global food supply. It was a global crisis and that's what we really need to avoid again. [To do] that it's a matter of getting American and European food policies much better. Both are dreadful.
I'd like to see what I call a mutual de-escalation of folly. The American folly is the huge subsidies for bio-fuels. Something like 30 percent of American grain is diverted from food to fuel and that's a lot of grain. That has a big impact on the world food price.
The equivalent European folly is the ban on genetically-modified crops.
Since that ban came into force in 1996, European grain output has fallen behind grain output in the U.S. at about one and a half percent per year because Europeans are not able to benefit from the technical progress that is embodied in genetically-modified varieties.
And very sadly because Europe banned GM, Africa, under the influence of Europe, banned it too and that was kind of suicidal. So a mutual de-escalation of folly - America lifting the subsidies on bio-fuels and Europe lifting the ban on GM would do more for the world's hungry than any reshuffling of aid budgets.
To what extent do you think aid money will assist an African agriculture revolution?
I see that as better judged by African governments than by donors. I've got increasingly suspicious of the donor fads: push the money to education, push the money to health, push the money to infrastructure, push the money to agriculture. We've been on that merry-go-round for a long time. It's a stupid approach.
African governments should basically be deciding how money is spent between sectors and they'll get that right as long as they're properly accountable to their own citizens. We shouldn't be interfering with that budget allocation process.
