Compare Switzerland with Uganda, which shares borders with Kenya, Sudan, Somalia, Rwanda, The Congo, and Tanzania. If your neighbours don’t like you, or if they are basket-case countries, there is no way you can export. Collier gives the example of Switzerland, who can trade through Italy or Germany. Being landlocked doesn’t have to be a disaster, as long as your neighbours have decent infrastructure and allow you to use their ports.
38% of the bottom billion live in landlocked countries, and these pose a real challenge to development. There is no incentive for them to invest in the country more broadly, so Angola’s oil is a curse and not a blessing.Ī third trap is geographical – the problem of being landlocked with bad neighbours. The government and the elite are making a fortune out of the oil. The phenomenon is known as ‘ Dutch Disease‘, after Holland’s mis-management of their natural gas stocks.
This isn’t just a problem of badly managed African nations. As the oil is pumped, other sectors of the economy wither, their costs rising from increased wage competition and the sudden rush of foreign currency into the country that is unfairly shared across the country. When oil is discovered for example, the demand for infrastructure and business development in that area will immediately trump any other concerns.
Sometimes this is simply because the revenues end up in the foreign bank accounts of the elite, but the big problem is this: the rush of investment into one sector draws attention, capital, and skills from all the other sectors of the economy. It’s rare for natural resource wealth to come back to the people. It sounds a little paradoxical to suggest that natural resource wealth is a factor in poverty, but you only have to consider that Sudan, Angola, and Zimbabwe all have oil to see how this plays out. Building peace has to be a major part of solving poverty.Īnother poverty trap is natural resources. Conflict then destroys infrastructure and scares away investors, leaving even fewer opportunities. Low growth means high unemployment and thus plenty of angry young men ready to fight. In the fight against poverty, civil war creates a vicious circle – war causes poverty, and low income contributes to tension. 73% of those in the poorest billion of the world’s population are either involved in or recovering from civil war. I’ve reviewed the book already, but I thought it was worth introducing some of his theory a bit more as part of my ongoing exploration into why some countries remain poor. In his book The Bottom Billion, Paul Collier outlines four poverty traps that prevent development.
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