Release to refresh
A conversation with Francis Fukuyama's class at Stanford
Professor of Economics and Public Policy
I am pleased to be interacting with Professor Francis Fukuyama’s class on Parlio. Please submit your questions before Thursday night (your time) and I shall respond to them. I am looking forward to a thoughtful conversation.
This Q&A took place between 10/12/15 and 10/18/15. Unanswered questions have been hidden
10 questions
Thanks for answering our questions! If a country were to discover a large wealth of valuable natural resources today, how would you recommend they handle it, given the historical knowledge we have now? How would that advice change if the country was a liberal democracy vs. an autocracy?
Professor of Economics and Public Policy
The Natural Resource Charter sets out a comprehensive 12-principle guide. From an economic perspective the key steps are:

1. Build the capacity to invest domestically – ‘investing in investing’
2. Put enough of the revenues into assets (but this has to be calculated from the change in the overall fiscal stance relative to baseline, rather than by putting money into a ‘pot’.

From a political perspective, the important thing is to build sufficient consensus very early on as to how the benefits should be assigned. The best assignment is whatever is considered reasonable by enough people.

In a democracy, I think it is necessary to build a political tripod of rules, (legislative or policy), institutions – (not rules, but mandated teams of public officials who internalize the mandate and develop the collective capacity to implement the rules); and most especially, build a critical mass of citizens who understand why the rules and the institutions are important and therefore defend them against the inevitable rent-seeking interests.
Stanford Prof, Author: The End of History & The Last Man
Paul, in their book Violence and Social Orders Doug North, Barry Weingast and John Wallis suggest that rent distribution is actually a widely-used way of controlling violence, and that if you took it away, instability would increase. It seems to me that this actually happened in Nigeria following the Biafran war and the discovery of oil in the 1960s-70s, when the elites began to use resource rents to buy off violent ethnic protest. But it's also somewhat at odds with your observation in The Bottom Billion that resource rents exacerbate ethnic tensions. Any comments?

BTW, I just saw Bo Rothstein and look forward to the new public policy program you're creating at Oxford!
Professor of Economics and Public Policy
The new paper ‘This Mine is Mine!’ establishes a clear causal link between resource rents and violence. I think what Nigeria shows is the importance of building agreement on how rents should be assigned – in Nigeria there was agreement to share them following the violence of the resource grab by Biafra. To my mind, the most successful was Khama, first President of Botswana, who established two common ideas. First, he asked all the clan chiefs, before anyone knew where diamonds might be discovered, whether they should be a clan asset or a national asset – everyone chose national. Second, he popularized the narrative ‘we’re poor, and so we must carry a heavy load’ – in other words, patience. The key political and economic steps in two simple moves!
Professor Collier, what is the most important question for development economics for which we have no (good) data?
Professor of Economics and Public Policy
How to improve the performance of public sector organizations with dysfunctional cultures? Schools where teachers don’t show up; health clinics where nurses steal drugs; tax authorities where inspectors take bribes; etc.
Professor Collier, in your TED talk about "The Bottom Billion" you mention the need for an informed citizenry who can hold their government accountable to international standards in order to avoid the usual pitfalls of the "resource curse." My question is how can popular action with an aim towards establishing accountability and improving governance be taken in regimes wherein civil society is suppressed? Is there any way around this hindrance to effective political action? How, if at all, can the international community potentially step in to help reformers in such societies effect change?
Professor of Economics and Public Policy
First, this is their struggle not ours. We can at best be supportive, at worst a hindrance. I have come to think that we might have overemphasized scrutiny of government relative to the positive agenda that a government can implement if it uses resources well. If the only thing that is emphasized is scrutiny, it implicitly criminalizes government.

While this is often somewhat justified, if the population is highly suspicious of government it can have perverse results – e.g. the only way a government can ‘show’ that it is using resources for the public benefit might be to borrow and spend the proceeds on raising public sector wages (Ghana, Zambia).

I now prefer to lead with a message that properly used, resources can transform the adult lives of the next generation and that the government has the key role in making this happen. From this big picture message, then go to the consequential need for specific rules and institutions, and from there to the critical mass of informed citizens I mentioned above.
Graduate student in East Asian Studies at Stanford
Hi Prof. Collier. My question is about the ultimate feasibility of rich countries helping poor ones to develop by providing aid. Prof. Steve Krasner puts you in the category that advocates a rational choice institutionalization approach in managing the aid to Africa, that is, you argue an "End sovereignty" strategy to ensure that there would be strong incentive for local rulers. But I am wondering how to make sure international donors would have strong enough incentives? After all, they can just spend money as they are asked to and claim that all the failures are not their responsibilities.
Professor of Economics and Public Policy
To the extent possible, it is good to get some international norms established and enforced: ‘external agencies of restraint’. But beyond the macroeconomic sphere this has proved to be far harder than it looked at the time when the Right to Protect was established. We cannot develop them: societies can be helped over some constraints, but only if they want to do so. Societies also develop their own forms of checks and balances, which do not necessarily look much like our tick-box list.

Ethiopia and Rwanda are low-corruption, high-accountability environments, but do not tick any of our conventional boxes. Several countries which tick them all are in practice pretty hopeless. Ghana and Zambia got better scores than Botswana on the Resource Governance Index – which focuses on transparency – but they badly messed up their management of natural resources.
Student(in), Diplomatic Academy of Vienna
Dear Professor Collier, thank you for answering our questions. I am interested how the rise of insurgent groups/terrorist groups, such as ISIL is influenced by the resource richness of a country? And what are, if any, the implications of the drop in oil prices for ISIL's operations?
Professor of Economics and Public Policy
See ‘This Mine is Mine!’ for a clear answer. Basically, it gives unambiguous evidence for the ‘feasibility’ hypothesis that resources finance rebel agendas. The paper also establishes a clear link to the price of the resource – so the fall in oil prices will significantly handicap ISIL. The Taliban were helped by the attempt to eradicate drugs from government-held territory in Afghanistan.
What advice would you give for conducting research in a way that is applicable to creating policy and not just existing in the realm of theory?
Professor of Economics and Public Policy
Try to establish what the pertinent range of public policy questions is in a country at the moment. Relatively few policies are seriously up for change. Even then, what policymakers mainly want to know is not the evidence of new research but the implications of the accumulated stock of knowledge. The most effective evidence is what has worked elsewhere.
In "The Natural Resource Trap" you describe the term "false consciousness" — a "mass miscomprehension" among citizens in explaining the causes and effects of economic growth and decline. What countries today would you say are suffering from these false economic narratives, and what are those narratives?
Professor of Economics and Public Policy
Argentina – ‘its foreigners who are to blame’ is the archetypal confused narrative. In several of the countries with new resource discoveries citizens have exaggerated expectations as to their value – ‘we’re rich, we don’t have to work anymore’ (that’s why President Khama’s narrative was so astute). Exaggerated expectations are bound to be disappointed; this interacts with the narrative of the need for scrutiny to yield: ‘we should be rich but we’re not because the government has stolen it’. Such narratives are incapacitating of effective government. Similarly, the narrative of ‘its our oil, (successfully perpetrated by nationalists in Scotland!)
How might the push for "green" energy affect countries whose economies are currently dependent on fossil fuel exports? Do you foresee efforts by rich countries to mitigate the effects of climate change by switching to renewable energy sources having unintended political consequences in the developing world?
Professor of Economics and Public Policy
I am more worried by rich countries stuffing green economies down the throats of poor countries. As I recall, the Board of the World Bank refused to finance coal in Mozambique and Botswana, but a big voting bloc on its Board is the USA, Germany and Australia, all of whom are major high-income coal producers. The high principle of green energy masques low hypocrisy. I’m less concerned about the loss of resource rents (e.g. Nigeria’s oil exports) because they have been used so badly. While there is potential, since it hasn’t been realized it is not much of a loss.
What’s your advice for maintaining optimism in the face of such huge challenges among the bottom billion? How did you sustain a sense of hope in your career while dealing with situations that lie at the extremes of what we can imagine?
Professor of Economics and Public Policy
I don’t do optimism/pessimism. The people who need credible hope are them, not us. We have a duty of rescue from their hopelessness, not ours. I have always taken the practical view that we start from wherever we are, and do whatever we can. (Arthur Ashe said something similar but more eloquent years ago). This is not our struggle, but it is a vital struggle, and so we should do what we can to help those brave people who are on the front line of it. But finally, the arrow is traveling in the right direction. See Steven Pinker’s great book The Better Angels of our Nature – violence is gradually falling, though it is a bumpy path. Economic convergence is harder, but it is feasible.