TED2008: Paul Collier – Compassion and enlightened self-interest

Dr. Paul Collier, an economist from Oxford, is a provocative thinker on one of the topics I’m most concerned about – why extreme poverty endures. He’s in a tough position, sandwiched between Ben Zander’s astoundingly popular performance last night, and a Nobel prize winner. “When you follow Ben Zander, good philosophy is to show a video. Then I discovered Al Gore is following me.” But he’s got fascinating ideas about some of the world’s hardest problems and captures the room’s attention quickly.

“How do we give credible hope to the billion poorest people in the world?” It has to be a combination of “compassion and enlightened self interst.” We need compassion, because a billion people are living in societies that have not offered credible hope. But we need enlightened self interest because “if economic divergence continues, combined with global integration, it will build a nightmare for our children.”

“It requires compassion to get ourselves started, and enlightened self-interest to get serious.”

What happened the last time we got serious? Well, it was the reconstruction of Europe after WWII via the Marshall Plan. Why did the US get serious? We were worried about the spread of Communism. So what did we do?
– Aid – “that was great, thanks.”
– Trade policy – “You ripped up your trade policy and reversed it. You stopped protectionism and brought Europe into global trading networks.”
– Security policy – from isolationism to troops in Europe for over 40 years
– “You tore up the eleventh commandment – national sovreignity.” Previously, the US was unwilling to join the League of Nations. But the US launched the UN, founded the IMF and encouraged the European Community. “This is still the waterfront of effective policy: aid, trade, security, governance.”

“Now the challenge is different – reversing the divergence of the bottom billion. Is this easier or harder?” Collier advises we focus on governance, because money isn’t the problem. There’s a huge natural resource boom taking place – Uganda and Ghana have both discovered oil, and Guinea has a huge discovery of iron. “These new revenue flows dwarf aid.” In Angola, new oil revenues are $50 billion a year – total aid flows to the bottom billion nations is $34 billion a year.

So how do we ensure these flows of money make life better? Historically, they don’t – economists talk of “the resource curse.” In the short term, oil makes everyone a bit better off… and in the long-term, countries tend to end up worse off. The critical issue, he tells us, is the initial level of governance. “If your governance is good enough, there’s no resource boom.” That’s happened in places like Norway, Australia, and Canada. “The resource curse is entirely confined to a threshhold of governance.” Nigeria is a great example of what can go wrong if you don’t have enough governance. You need a level of governance around where Portugal was in the 1980s.

So, is the bottom billion above or below that threshhold? Collier hoped that the spread of democracy would help some of these nations. “And democracy has sigificant effects. But they’re adverse effects – democracies make even more of a mess of these booms than autocracies.” While Collier tells us he was tempted to give up his research at this point, he made a critical discovery. Democracies involve both elections and checks and balances. “It’s the electoral competition that does damage, but strong checks and balances make booms good.” Unfortunately, new democracies don’t have these checks and balances – they’re “instant democracies”.

There’s now an intense struggle to bring in these checks and balances. We need international standards, voluntary ones. He refers to resource extraction transparency standards that are currently being pushed in the developing world. Nigerian reformers printed some of these standards in local newspapers – there was so much interest that circulation in newspapers spiked.

What are these standards? Instead of letting an oil company fly in and meet with a minister, making a deal that’s good for the company, good for the minister, and not good for the country, why not have transparent auctions? The British treasury estimated that the rights to the 3G mobile spectrum were worth $2 billion – it sold at auction for $20 billion. “If the British treasury got it that wrong. imagine how the government of Sierra Leone will do.” And so the government of Sierra Leone immediately asked for help with running resource auctions.

Collier tells us that “unless we have an informed society, politicans will get away with gestures.” To build an informed citizenry, Collier “broke all the professional rules and wrote an Economics book you could read on a beach.” He tells us that a blogger once commented “Collier is not charismatic. But his arguments are compelling.” And that’s why, “if you agree with that comment, you realize that I need you.”

I disagree with that blogger. Collier may have been the best speaker at TED this year, despite some seriously stiff competition – powerful ideas presented compactly and compellingly. Read the damn book.