Still the Bottom Billion

Glenn Gottselig interviews Oxford economist Paul Collier

F&D: In a recent presentation to IMF economists, you spoke about the macroeconomics of the bottom billion. What do you see as the macroeconomic challenges that these countries have in common?

Collier: I think the countries of the bottom billion, the low-income countries, are distinctive not just in terms of having on average fewer good policies than the middle-income countries; they’ve got different problems. So good policies in those environments would just look different from good policies in middle-income environments, and that’s not sufficiently recognized. Let’s start with what the key differences are between a low-income economy and a middle-income economy. Out of those differences will emerge different strategies and different responses.

The overarching difference is that these countries are desperately capital scarce. The implication of that is that they need to go through a prolonged phase of high investment. For the moment, in Africa the average investment rate to GDP is less than 20 percent, whereas to catch up, to converge with other economies, it needs to be over 30 percent. So they must move from under 20 to over 30. That’s a big change.

See full Interview.