(Note: This is a guest post by Feyza Ileri, who was a student in my development seminar last fall. Feyza took a course titled “Current Issues in International Trade and Economic Development” in the Department of Economics with my colleague Ed Tower. This book review was one of her assignments for Ed’s course.)
Catching Up: What LDCs Can Do and What Others Can Help
Paul Collier, Published by Commonwealth Secretariat, February 2011
80 pages, $24.95
Paul Collier, professor of economics and director of the Centre for the Study of African Economies at Oxford, has written a number of engaging and provocative books on development. Catching Up is one such book. The book focuses on the least developed countries (LDCs) and suggests a number of development strategies for the governments of those countries.
Although the LDCs’ share of the world’s population is around 12 percent, they account for less than 2 per cent of the world’s GDP. Taking this into consideration, Collier presents a guide for decision makers who aim to make LDCs attain and sustain a significant rate of growth and catch up with the middle income developing countries.
The book indicates that for the 2000-2008 period, the LDCs achieved and a 4-percent increase on average in GDP per capita GDP, an 11-percent decrease in mortality. Despite these improvements, since other developing countries have grown faster, the income differential between the LDCs and other developing countries has widened and is still widening. Moreover, Collier believes that governments hold the authority and credibility to force change. He thus offers concrete recommendations for the governments of the LDCs.
One striking point in Collier’s book is related to energy. The growth in the world economy has driven up the demand for energy. Therefore, the existence of natural resources is one of the most important opportunities for the improvement in the LDCs, Collier says. The book concentrates on the importance of investment in extraction and suggests sale of resource extraction rights in exchange for infrastructure or aid by donors.
One more interesting point from Catching Up is related to the aid received by the LDCs from the Organization from Economic Cooperation and Development (OECD). One of the rationales for OECD aid to middle income countries is the existence of many poor people in these countries despite the higher overall income. Collier criticizes this statement by saying that unlike LDCs, “middle income countries can lower their poverty level by redistributing their income,” which is the responsibility of the governments of these countries.
Understanding the nature of underdeveloped market economies is the basis of development policy. While there is no doubt that the LDCs will need more assistance to escape from the vicious circle of poverty, innovative approaches are needed to ensure effectiveness. Collier has recommendations that are quite familiar to those who deal with aid to poor countries. Some of them are a change in aid allocation in favor of LDCs and a global investment guarantee scheme by them. The most worthy recommendation is to enable LDC governments to borrow at close to the risk free world commercial interest rate. As a final point, Collier underlines the importance of infrastructure for the LDCs, since they need cost-effective transport corridors to attract investment.
Collier underlines the importance of understanding the reality of poverty in each country, determining the compatibility of government policies with the aim of overcoming poverty, and recommending necessary reforms. Poverty is a multidimensional phenomenon whose bottom line is hunger accompanied with important psychological dimensions such as powerlessness, dependency, and shame. Therefore, something effective should be done by LDC governments and the international community. However, Collier concludes that governments of these countries “can collectively help themselves by recognizing that many of them have a credibility problem which is very close to their own interests, and then using the international system to do something about it.”
Catching Up provides a way for LDC governments to determine their priorities for economic improvement. Whatever one’s feelings about Collier’s recommendations, he makes a substantial contribution to the literature on the LDCs. His evidence-based approach and plausible explanations are worthwhile for both policy makers in LDCs and international stakeholders. The book is a brief, effective and precise contribution to the improvement of LDCs.