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| Copyright: Daniel Vegel |
Paul Collier is a renowned economist and political scientist specialised in development and natural resources, having focussed much of his work in the poorest countries on Earth, especially those in Africa. He is famous for his book “The bottom billion”. On the 14th of March he came to CEU to present his latest work “The plundered planet”. The CEU Weekly met with him to get some extra insights in his experience and work.
Good morning, Mr. Collier. As an introduction, could you please tell us a little about your background?
I am professor of economics at Oxford University, and I work on Africa with a whole range of themes about challenges on development. I am quite heavily involved in the world of public policy and I have given advise to the World Bank, the IMF and the British Government, as well as to various African Governments. So, I can say I am half in the world of public policy and half in that of economics.
How did you get so involved in African issues?
In 1968 I was a student. It was a time of activism and social concern. I come from that background, and that is how I got involved in Africa: I thought that the Economics I was studying, if they were going to be useful anywhere, they should be useful for some of the poorest countries on Earth, because very few people there had the training that I was getting.
Africa is a poor continent that, until recently, hasn’t had much economic success, so it’s very intriguing for economists to engage with. And why? I had no family background in Africa as some of my university colleagues had. My father was not a Governor General or anything like that. Just the opposite: both of my parents left school when they were 12 and lived pretty frustrated lives, and I can see millions of people in the same situation in Africa. The economic failure of Africa has denied millions of ordinary people the opportunities for realizing their potential, and this is why I got excited about the place.
Maybe you can introduce our readers to your last books, “The bottom billion” and “The plundered planet”?
In “The bottom billion”, I was arguing that the idea of developing countries is not any more a meaningful concept. Instead of having a world in which the key divide is a line between developing countries and developed countries, the current divide is a three way divide: the developed countries (the lucky billion), the emerging market economies (about 5 billion people), and another billion people stuck in the bottom of the World economy in about 60 poor little countries that are not rapidly developing. They missed the boat of development.
The emerging market economies got into the boat of development in the late 80s and 90s, but the bottom billion didn’t. This book defends that the key focus of development policy should be on these bottom billion countries that are still struggling. We need to think beyond aid, we need to look at a whole range of policies, from trade to governance and security and see what we can do about it, and we need to understand why they haven’t developed while most other countries have.
“The plundered planet”, which is my most recent book, is about the environment, about how to reconcile environment and prosperity. It is about management of natural assets. In the absence of good regulation, natural assets tend to get plundered. For the poorest countries on Earth, this is a very big issue, because natural wealth is for them the main form of wealth. So “The plundered planet” is not only about poor countries but about the challenges of managing natural assets and liability in developing countries as well. It has a chapter on fish stocks management, another on carbon emissions and climate change. Another one talks about the global food supply and the mistakes of the USA and Europe that have lead to the global food crisis. But the heart of the book is about how poor countries can use their natural assets.
You have mentioned something that affects us more directly. How do you think is the influence European policies such as the Common Agricultural Policy and the Common Fisheries Policy?
If we take fish, it seems to me that our policies towards the global fish stocks are disastrously dysfunctional. First of all, this is a common pool resource that is being plundered because there are no common rules. Second, it’s a natural asset that has value, and some of this value should benefit everybody, what in Economy is called “rents”. A barrel of oil takes 10 dollars to get it out of the ground but it’s worth 100 dollars. 90 dollars of that barrel is a rent, the value once you have recovered the invested capital and obtained a benefit. The value of fish is a rent, but at the moment the rent accrues to the fishermen who catch it, but the fishermen who catch the fish are not entitled to the rent on fish, they are entitled to a return on their capital, the labour, the risk… but not to the rent on fish. To my mind, fish ought to be quantitatively regulated, and secondly there should be a tax, which either consumers or fishermen should pay. Instead of taxing the catching and consumption of fish, we actually subsidize it.
While looking at the global fishing fleet, I reckoned that a sensible level of tax could be worth the value of 20 billion dollars a year. And instead, we are subsidizing the global fishing industry for a value of about 30 billion dollars a year. So, instead of granting the citizens a check for 20 billion, we are taking 30 billion out of them. The result is that there is far too much catching of fish, so we subsidize the plundering of fish stocks. One manifestation of this is that the fishing fleets are far too big, about double what is needed to catch the fish that can be reliably and sustainably consumed. This is massively inefficient, we don’t end up with rich fishermen, just with too big fishing fleets that are underused. Fisheries policy is therefore to my mind a clear example of a tragedy of the commons.
Somalia is a great example of this plundering. One explanation for piracy is that, if you destroy the livelihoods of Somali fishermen (as foreign fisheries have done) leaving them without fish, they follow Jesus’ advise and they become fishers of men. Guys with boats and no fish to catch, what are they going to do?
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| Copyright: Daniel Vegel |
About food, the world food crisis picked first in 2008 and then in 2011. It is a very serious matter, because if global food prices are very high, who suffers? What prices do is to cut down demand to equal the available supply. Some people are going to eat less. Not you or me, surely. It is the poor people who buy food. Not farmers, those eat their own food. The people who really get squeezed are poor people living in cities in developing countries, because they don’t grow food, they buy it. They end up eating less, particularly the children. If children are malnourished for more than about two years, they get what is called “stunting”. This is a physical condition in which people are permanently shorter. But it is also a mental condition: they are not only permanently shorter but also less intelligent. The key thing is the irreversibility. It goes for a lifetime, and there is evidence that it may even pass from one generation to the next. So, stunting is a complete disaster, and that’s what happens if you get price pikes that last more than a couple of years. It is absolutely imperative to avoid this price pikes.
The problem is about supply. There hasn’t been enough food supply. The main food suppliers are North America and Europe, and both of them have made foolish mistakes that have reduced food supply. In America, this was biofuels. Using 30% of your crops to turn into energy is a stupid and selfish way to generate energy, because you are switching it basically from the urban poor to American gas consumers. And this was driven by a political economy of biofuel subsidies. Fortunately, this has been reduced thanks to the gas fracking, which has lowered the cost of energy, making biofuels look as a less attractive option.
The equivalent mistake in Europe has not been biofuels, but they are targeting them, which is an equally stupid mistake. Europe is hell bent on repeating American mistake. But Europe’s unique folly was about genetically modified crops (GMCs), which had two consequences. The first one was to reduce the trend of European grain productivity, so since they banned GMCs Europe lacked behind the American productivity trend. The second consequence was that, when Europe banned GMCs, Africa did as well, because African governments still look up to Europe. And so, across Africa, you get bans in GMCs, which is like shooting yourself in the hand, because Africa desperately needs rapid technological change on food production because they are being hit by climate change. GMCs can speed up this technological change.
And as regards this tax on fishing… people around the world depend on fishing for their livelihoods. Don’t you think the burden would be unequal around the world?
In coastal countries, the revenue from the tax on fish tan accrues to the governance whose waters are being fished. But this requires enforcement. So there are two layers of problems: enforcing territorial waters (that nowadays can be done with satellite technology) and the regulation of the catches and taxes As you limit the size of the catch, the value of this increases, and the rents on fish go up. Who should catch the value? Should it be the fishermen? I think it should be the whole society. The territorial waters mean that the whole society owns that territory, so it’s the citizens collectively who should earn those rents, as they do with oil, but in a renewable way.
Nowadays, they only country who does this is New Zealand. They first have a quota on the fish, and then they auction the fishing opportunities to fishermen, who buy the rights to the rents on fish. So who gets the rents on fish? All the New Zealand citizens, in the form of money incoming the Government. Who gets the rents on fish in Europe? European fishermen.
We guess from you comments that you think that biofuels in the future will have no place in the global energy mix, for their competition with food production?
I don’t want to be dogmatic, but the subsidy on biofuels has no future, that’s the big mistake. We shouldn’t be using tax payers’ money to convert food into energy. If you think about it, since we already tax other forms of energy, the price that people can get from biofuels already includes a subsidy effect that is the tax on other fuels. Even if we don’t give subsidies, we give too strong incentives to produce biofuels. There are some cases where it locally can make sense. Ethiopia, far away from the coast, has to import expensive fuel… if they could grow their own, that may make economic sense.
The same would happen in any area where transport costs are high and you have spare land. But this is not a blanket solution to energy problems. If America used all its grain to meet its energy needs, it would only meet 8% of them.
What do you think will be the future role of Africa in the world development?
Africa nowadays has the biggest opportunity on its hands: all these natural resource discovered recently. And it’s not an easy opportunity because we know that the history of natural resource extraction in Africa is a history of plunder and waste. The challenge for Africa is whether they can harness this opportunity by learning from history, or whether it just repeats history. The default option is to repeat history, there are good reasons why history happens. Whether Africans will win the struggle to learn from history is still to see. Brave people are trying to achieve change all around the continent. In some places they win, in some places they loose. It is the big drama of our times: whether a billion people catch up with the rest of the world or crashes in prolonged poverty.
Sergio Rejado Albaina, Spain
MESPOM
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