Paul Collier on post conflict reconstruction, independent service authorities, how to manage natural resources and the hidden logic of the G20 London Summit

June 29, 2009

     By Duncan Green     

Paul came to give a talk to Oxfam’s big cheeses last week based on his new book War Guns and Votes (see my review here) and they invited me along. Here are some highlights:

Post Conflict Reconstruction: The conventional sequence is ‘build the politics first, then the economics will follow’. Collier thinks the order should be reversed. Conflict is a zero sum game, he says – someone else’s gain is your loss. It takes a decade of steady growth to shift politics to the positive sum game of mature democracies, and to weed out the bad guys who were attracted to politics under the old regime.

The key to cleansing the political system via the economy is to focus on a small number of essential things: jobs (especially for young men) and essential services, with possibly food security as a third component, but no more complicated than that. Post-conflict states are highly uncompetitive so target non-tradables rather than export industries – construction ticks all the boxes (jobs for young men, non tradable etc), but don’t ask the Chinese to do it (they bring their own workforce). Governments should identify bottlenecks that increase prices in the construction sector (skills, land, cement, finance etc) and concentrate on freeing them up.

Independent Service Authorities (ISAs) for Essential Services: State-building in post independence Africa was based on a 1950s European model of a single all-providing state in education, health etc. It didn’t work. The answer is to unbundle that state model into
a) setting policy (stays with government)
b) allocating money to providers (ISAs)
c) service delivery (all welcome – churches, not for profits, private sector etc)

The debates and doubts largely surround the intermediate role of ISAs. Paul sees them as free standing, with boards made up of government, donor and civil society representatives. ISAs can ‘spot winners and scale them up, fire as well as hire and pay people properly’. See here for his latest paper on the ISA proposal.

The discussion on ISAs revolved around what happens to a short term fix as the years go by. There have been lots of questions on an exit strategy – would ISAs eventually pass control back to a strengthened central government, or would they become entrenched as a parallel system? Collier responded ‘there doesn’t have to be an exit strategy. This may be the right way to deliver services in the long term’. i.e. it may not about moving from Liberia (fragile state, ISA created to channel donor funds) to Ghana (effective state, donors hand over money to the government). You create a mechanism that may never graduate, a parallel system that lasts for ever.

And what about power? ISAs will control the money, so the powerful and corrupt will gravitate towards them – what’s to prevent them being captured by vested interests, doling out the goodies to their allies, and becoming even less accountable than governments? Paul puts his hopes on donors to discipline the ISAs and prevent capture. ‘At the heart of this is that the ISA must take good decisions, and donors have to keep it so, at least for the first few years.’ This smacks of the desperate search of the technocrat to somehow magic away messy issues of power and politics that get in the way of good decisions.

Although he thinks civil society organizations should sit on ISAs, there is little sense of countervailing power from below in holding governments (or ISAs) accountable– is this the missing piece – an Independent People’s Authority rather than an ISA? On ISAs I came away from the discussion more sceptical, not less. They sound a bit like food aid – a seductive, short term solution that can easily turn into a long term trap.

Resource Charter: Paul calls his work on this his ‘biggest pride’. Resource transfers are an order of magnitude larger than aid, but receive far less attention. The problems are much greater, as is the dispersion of performance in different countries (from Botswana’s excellent management of diamond wealth to Nigeria’s lamentable performance on oil and gas). He concludes ‘we need to get a range of decisions right over a generation in everything from how to explore to how to spend the revenue.’

The resource charter group has come up with 12 ‘precepts’ that offer guidance on the key decisions that governments face, with different levels of details for decision makers, policy wonks, and civil servants. The Charter has a technical group chaired by the nobel laureate Mike Spence, who also chaired last year’s Growth Commission, and is soon to announce a board of 3 eminent people from natural resource countries (he didn’t divulge names, sorry).

Global Economic Crisis: ‘The G20 deal in April looks bizarre until you recognize that the guiding principle was that anything agreed must not add to the spending figures of G20 governments’. So the deal to increase the IMF’s finances through a new issue of Special Drawing Rights (SDRs) was ‘quantitative easing on a global scale’. To the World Bank, the G20 said ‘take more risk – lend more on same capital base’. i.e. exactly the opposite of their advice to the commercial banks. No new money was agreed for bilateral aid agencies like DFID, because that would count as spending.