FALLING BEHIND AND FALLING APART 9 history.They imply that children in these countries will grow up to have lives dramatically different from those of their parents.Even where people are still poor,these societies can be suffused with hope:time is on their side. But how about the bottom billion?Let's again take it decade by decade. During the 1970s their per capita income rose at 0.5 percent a year,so they were becoming slightly better off in absolute terms but at a rate that was likely to be barely perceptible.Given the high degree of volatility of individual incomes in these societies,the slight overall tendency to im- provement is likely to have been drowned by these individual risks.The overall tenor of the society will have been dominated by individual fears of falling rather than hope coming from society-wide progress.But in the 1980s the performance of the bottom billion got much worse,declining at 0.4 percent a year.In absolute terms,by the end of the 1980s they were back to where they had been in 1970.If you had been living in these soci- eties over that full sweep of twenty years,the only economic experience was of individual volatility:some people went up and some went down. There was no society-wide reason for hope.And then came the 1990s. This is now seen as the golden decade,between the end of the Cold War and 9/11-the decade of the cloudless sky and booming markets.It wasn't so golden for the bottom billion:their rate of absolute decline ac- celerated to 0.5 percent a year.By the turn of the millennium they were therefore poorer than they had been in 1970. Is this dismal performance just an artifact of the data?I think that,on the contrary,the genuine problems that afflict the gathering of economic data in the poorest countries are likely overall to have caused an underes- timate of their decline.For the countries that have really fallen apart,there are no usable data.For example,the estimated decline among the bottom- billion countries during the 1990s does not include whatever might have been happening in Somalia and Afghanistan.But excluding them is equiv- alent to assuming that their performance was exactly at the average for the group,and I would be surprised,to say the least,if this was true;I would think it was much worse.In the first four years of the present decade the growth of the bottom billion has picked up to around 1.7 percent,still far below that of the rest of the developing world,but markedly better in ab- solute terms.Unfortunately,however,this current improvement is likely due to the short-term effects of resource discoveries and high world prices
history. They imply that children in these countries will grow up to have lives dramatically different from those of their parents. Even where people are still poor, these societies can be suffused with hope: time is on their side. But how about the bottom billion? Let’s again take it decade by decade. During the 1970s their per capita income rose at 0.5 percent a year, so they were becoming slightly better off in absolute terms but at a rate that was likely to be barely perceptible. Given the high degree of volatility of individual incomes in these societies, the slight overall tendency to improvement is likely to have been drowned by these individual risks. The overall tenor of the society will have been dominated by individual fears of falling rather than hope coming from society-wide progress. But in the 1980s the performance of the bottom billion got much worse, declining at 0.4 percent a year. In absolute terms, by the end of the 1980s they were back to where they had been in 1970. If you had been living in these societies over that full sweep of twenty years, the only economic experience was of individual volatility: some people went up and some went down. There was no society-wide reason for hope. And then came the 1990s. This is now seen as the golden decade, between the end of the Cold War and 9/11—the decade of the cloudless sky and booming markets. It wasn’t so golden for the bottom billion: their rate of absolute decline accelerated to 0.5 percent a year. By the turn of the millennium they were therefore poorer than they had been in 1970. Is this dismal performance just an artifact of the data? I think that, on the contrary, the genuine problems that afflict the gathering of economic data in the poorest countries are likely overall to have caused an underestimate of their decline. For the countries that have really fallen apart, there are no usable data. For example, the estimated decline among the bottombillion countries during the 1990s does not include whatever might have been happening in Somalia and Afghanistan. But excluding them is equivalent to assuming that their performance was exactly at the average for the group, and I would be surprised, to say the least, if this was true; I would think it was much worse. In the first four years of the present decade the growth of the bottom billion has picked up to around 1.7 percent, still far below that of the rest of the developing world, but markedly better in absolute terms. Unfortunately, however, this current improvement is likely due to the short-term effects of resource discoveries and high world prices FALLING BEHIND AND FALLING APART 9
10 WHAT'S THE ISSUE? for the natural resources that the bottom billion export.For example,the star growth performer among all the economies of the bottom billion has been Equatorial Guinea.This is a small country of coups and corruption where offshore oil was recently discovered and now dominates income.In sum,even if we were to treat these recent figures as hopeful,which I think would be a misinterpretation,the growth of the bottom billion remains much slower at its peak than even the slowest period of growth in the rest of the developing world and brings them about back to where they were in1970. Think about what these two sets of growth rates imply.During the 1970s the bottom billion diverged in growth from the rest of the develop- ing world by 2 percent a year.So even then the main feature of the societies in the bottom billion was divergence,not development.But the situation soon became alarmingly worse.During the 1980s the divergence acceler- ated to 4.4 percent a year,and during the 1990s it accelerated further to an astonishing 5 percent a year.Taking the three decades as a whole,the ex- perience of the societies in the bottom billion was thus one of massive and accelerating divergence.Given the power of compound growth rates,these differences between the bottom billion and the rest of the developing world will rapidly cumulate into two different worlds.Indeed,the diver- gence has indeed already pushed most of the countries of the bottom billion to the lowest spot in the global pile. It was not always that way.Before globalization gave huge opportunities to China and India,they were poorer than many of the countries that have been caught in the traps.But China and India broke free in time to pene- trate global markets,whereas other countries that were initially less poor didn't.For the last two decades this has produced a growth pattern that appears confusing.Some initially poor countries are growing very well, and so it can easily look as if there is not really a problem:the bottom ap- pears to be growing as fast as the rest.Over the next two decades the true nature of the problem is going to become apparent,however,because the countries that are trapped in stagnation or decline are now pretty well the poorest.The average person in the societies of the bottom billion now has an income only around one-fifth that of the typical person in the other de- veloping countries,and the gap will just get worse with time.Picture this as a billion people stuck in a train that is slowly rolling backward downhill
for the natural resources that the bottom billion export. For example, the star growth performer among all the economies of the bottom billion has been Equatorial Guinea. This is a small country of coups and corruption where offshore oil was recently discovered and now dominates income. In sum, even if we were to treat these recent figures as hopeful, which I think would be a misinterpretation, the growth of the bottom billion remains much slower at its peak than even the slowest period of growth in the rest of the developing world and brings them about back to where they were in 1970. Think about what these two sets of growth rates imply. During the 1970s the bottom billion diverged in growth from the rest of the developing world by 2 percent a year. So even then the main feature of the societies in the bottom billion was divergence, not development. But the situation soon became alarmingly worse. During the 1980s the divergence accelerated to 4.4 percent a year, and during the 1990s it accelerated further to an astonishing 5 percent a year. Taking the three decades as a whole, the experience of the societies in the bottom billion was thus one of massive and accelerating divergence. Given the power of compound growth rates, these differences between the bottom billion and the rest of the developing world will rapidly cumulate into two different worlds. Indeed, the divergence has indeed already pushed most of the countries of the bottom billion to the lowest spot in the global pile. It was not always that way. Before globalization gave huge opportunities to China and India, they were poorer than many of the countries that have been caught in the traps. But China and India broke free in time to penetrate global markets, whereas other countries that were initially less poor didn’t. For the last two decades this has produced a growth pattern that appears confusing. Some initially poor countries are growing very well, and so it can easily look as if there is not really a problem: the bottom appears to be growing as fast as the rest. Over the next two decades the true nature of the problem is going to become apparent, however, because the countries that are trapped in stagnation or decline are now pretty well the poorest. The average person in the societies of the bottom billion now has an income only around one-fifth that of the typical person in the other developing countries, and the gap will just get worse with time. Picture this as a billion people stuck in a train that is slowly rolling backward downhill. 10 WHAT’S THE ISSUE?
FALLING BEHIND AND FALLING APART 11 By 2050 the development gulf will no longer be between a rich billion in the most developed countries and five billion in the developing countries; rather,it will be between the trapped billion and the rest of humankind So far I have couched the problem of the bottom billion in terms of growth rates:these countries'growth rate has been negative in absolute terms,and in relative terms massively below that of the rest of the devel- oping world.Nowadays,however,the talk is about poverty reduction and the other Millennium Development Goals,not about growth rates.Many of the people who care most about development feel more comfortable talk- ing about goals such as getting girls into school than discussing growth.I share the enthusiasm for getting girls into school,and indeed for all the other goals.But I do not share the discomfort about growth.While I was directing the World Bank's research department,the most controversial pa- per we produced was one called "Growth Is Good for the Poor."Some NGOs hated it,and it was the only time in five years that Jim Wolfensohn, the Bank's president,phoned me to voice his concern.Yet the central prob- lem of the bottom billion is that they have not grown.The failure of the growth process in these societies simply has to be our core concern,and curing it the core challenge of development.For policies in the rich world to become more supportive of growth in these societies,we will need the full lobbying power of those who care about the world's poor.And so the people who care will need to take another look at growth. I am definitely not arguing that we should be indifferent to how an economy grows.The growth of Equatorial Guinea,for example,produces benefits for only a handful of its people,but this is exceptional;growth usually does benefit ordinary people.The exaggerated suspicion of growth by those who are concerned about development has manifested itself in the adjectives with which the word growth is now routinely encumbered. In strategy documents the word is now generally seen only in the context of the phrase "sustainable,pro-poor growth."Yet overwhelmingly,the problem of the bottom billion has not been that they have had the wrong type of growth,it is that they have not had any growth.The suspicion of growth has inadvertently undermined genuinely strategic thinking.I re- member when one of the world's great experts on banking consulted me because he had been asked to advise one of the countries of the bottom billion.He was struggling to come up with evidence that banking reform
By 2050 the development gulf will no longer be between a rich billion in the most developed countries and five billion in the developing countries; rather, it will be between the trapped billion and the rest of humankind. So far I have couched the problem of the bottom billion in terms of growth rates: these countries’ growth rate has been negative in absolute terms, and in relative terms massively below that of the rest of the developing world. Nowadays, however, the talk is about poverty reduction and the other Millennium Development Goals, not about growth rates. Many of the people who care most about development feel more comfortable talking about goals such as getting girls into school than discussing growth. I share the enthusiasm for getting girls into school, and indeed for all the other goals. But I do not share the discomfort about growth. While I was directing the World Bank’s research department, the most controversial paper we produced was one called “Growth Is Good for the Poor.” Some NGOs hated it, and it was the only time in five years that Jim Wolfensohn, the Bank’s president, phoned me to voice his concern. Yet the central problem of the bottom billion is that they have not grown. The failure of the growth process in these societies simply has to be our core concern, and curing it the core challenge of development. For policies in the rich world to become more supportive of growth in these societies, we will need the full lobbying power of those who care about the world’s poor. And so the people who care will need to take another look at growth. I am definitely not arguing that we should be indifferent to how an economy grows. The growth of Equatorial Guinea, for example, produces benefits for only a handful of its people, but this is exceptional; growth usually does benefit ordinary people. The exaggerated suspicion of growth by those who are concerned about development has manifested itself in the adjectives with which the word growth is now routinely encumbered. In strategy documents the word is now generally seen only in the context of the phrase “sustainable, pro-poor growth.” Yet overwhelmingly, the problem of the bottom billion has not been that they have had the wrong type of growth, it is that they have not had any growth. The suspicion of growth has inadvertently undermined genuinely strategic thinking. I remember when one of the world’s great experts on banking consulted me because he had been asked to advise one of the countries of the bottom billion. He was struggling to come up with evidence that banking reform FALLING BEHIND AND FALLING APART 11
12 WHAT'S THE ISSUE? would directly help the poorest people in the country,because he sensed that without such evidence his advice would be dismissed.The much stronger evidence that it would help the growth process would not be val- ued,he felt.Getting growth started in the bottom billion is going to be hard enough even without such hindrances. We cannot make poverty history unless the countries of the bottom bil- lion start to grow,and they will not grow by turning them into Cuba. Cuba is a stagnant,low-income,egalitarian country with good social ser- vices.If the bottom billion emulated Cuba,would this solve their prob- lems?I think that the vast majority of the people living in the bottom billion-and indeed in Cuba-would see it as continued failure.To my mind,development is about giving hope to ordinary people that their chil- dren will live in a society that has caught up with the rest of the world. Take that hope away and the smart people will use their energies not to develop their society but to escape from it-as have a million Cubans. Catching up is about radically raising growth in the countries now at the bottom.The fact that stagnation has persisted over such a long period tells us that it is going to be difficult.What can we do beyond caring? Beyond the Headless Heart:Accepting Complexity The problem of the bottom billion is serious,but it is fixable.It is much less daunting than the dramatic problems that were overcome in the twen- tieth century:disease,fascism,and communism.But like most serious problems,it is complicated.Change is going to have to come from within the societies of the bottom billion,but our own policies could make these efforts more likely to succeed,and so more likely to be undertaken. We will need a range of policy instruments to encourage the countries of the bottom billion to take steps toward change.To date we have used these instruments badly,so there is considerable scope for improvement. The main challenge is that these policy tools span various government agencies,which are not always inclined to cooperate.Traditionally,devel- opment has been assigned to aid agencies,which are low in almost every government's pecking order.The U.S.Department of Defense is not going to take advice from that country's Agency for International Development. The British Department of Trade and Industry is not going to listen to the
would directly help the poorest people in the country, because he sensed that without such evidence his advice would be dismissed. The much stronger evidence that it would help the growth process would not be valued, he felt. Getting growth started in the bottom billion is going to be hard enough even without such hindrances. We cannot make poverty history unless the countries of the bottom billion start to grow, and they will not grow by turning them into Cuba. Cuba is a stagnant, low-income, egalitarian country with good social services. If the bottom billion emulated Cuba, would this solve their problems? I think that the vast majority of the people living in the bottom billion—and indeed in Cuba—would see it as continued failure. To my mind, development is about giving hope to ordinary people that their children will live in a society that has caught up with the rest of the world. Take that hope away and the smart people will use their energies not to develop their society but to escape from it—as have a million Cubans. Catching up is about radically raising growth in the countries now at the bottom. The fact that stagnation has persisted over such a long period tells us that it is going to be difficult. What can we do beyond caring? Beyond the Headless Heart: Accepting Complexity The problem of the bottom billion is serious, but it is fixable. It is much less daunting than the dramatic problems that were overcome in the twentieth century: disease, fascism, and communism. But like most serious problems, it is complicated. Change is going to have to come from within the societies of the bottom billion, but our own policies could make these efforts more likely to succeed, and so more likely to be undertaken. We will need a range of policy instruments to encourage the countries of the bottom billion to take steps toward change. To date we have used these instruments badly, so there is considerable scope for improvement. The main challenge is that these policy tools span various government agencies, which are not always inclined to cooperate. Traditionally, development has been assigned to aid agencies, which are low in almost every government’s pecking order. The U.S. Department of Defense is not going to take advice from that country’s Agency for International Development. The British Department of Trade and Industry is not going to listen to the 12 WHAT’S THE ISSUE?
FALLING BEHIND AND FALLING APART 13 Department for International Development.To make development policy coherent will require what is termed a "whole-of-government"approach. To get this degree of coordination requires heads of government to focus on the problem.And because success depends on more than just what the United States or any other nation does on its own,it will require joint ac- tion across major governments. The only forum where heads of the major governments routinely meet is the G8.Addressing the problem of the bottom billion is an ideal topic for the G8,but it means using the full range of available policies and so going beyond the Gleneagles agenda of 2005,which was a pledge to dou- ble aid programs.Africa is already back on the G8 agenda for the 2007 meeting in Germany."Africa+"should rightly stay on the G8 agenda until the bottom billion are decisively freed from the development traps.This book sets out an agenda for the G8 that would be effective
Department for International Development. To make development policy coherent will require what is termed a “whole-of-government” approach. To get this degree of coordination requires heads of government to focus on the problem. And because success depends on more than just what the United States or any other nation does on its own, it will require joint action across major governments. The only forum where heads of the major governments routinely meet is the G8. Addressing the problem of the bottom billion is an ideal topic for the G8, but it means using the full range of available policies and so going beyond the Gleneagles agenda of 2005, which was a pledge to double aid programs. Africa is already back on the G8 agenda for the 2007 meeting in Germany. “Africa+” should rightly stay on the G8 agenda until the bottom billion are decisively freed from the development traps. This book sets out an agenda for the G8 that would be effective. FALLING BEHIND AND FALLING APART 13