Paul Collier - Wars, Guns, and Votes

by Democracy in Dangerous Places (pdf)

  ment of Ethiopia, which also wants to expand schooling, re-

  quests that the Swedes pay for it. This releases money that the

  Ethiopian government would otherwise have spent on schools

  for whatever else it might choose.

  As donors woke up to this problem, most of them moved

  away from projects to budget support: that is, they simply

  handed over a check to the government, which it could treat

  as general revenue for the budget. While this acknowledged

  reality, it was sometimes highly irresponsible. Unless budget

  systems are sound, money put into the budget will leak into

  patronage.

  It is one thing to say that budget systems should be sound

  and quite another to ensure it. Two complementary resources

  are needed: capacity and verification. Public revenue will leak

  from wherever there is a hole, and so there is a large prelimi-

  nary task of overhauling the practical processes by which money

  is spent: budgets need accountants, and lots of them. Starting

  from a culture in which there is no presumption of honesty,

  the system of financial checks needs to mirror the paranoia of

  the dictatorships: there needs to be so much interlocking moni-

  toring that even if a few accountants are prepared to be cor-

  rupt, they cannot make a difference. Superficially this may look

  wasteful, because the administrative cost per dollar of public

  spending will be much higher than where there is already a

  prevailing culture of honesty. But that is simply the reality: cor-

  ruption makes public spending less efficient.

  Donors can help governments put proper systems of ac-

  countancy into place through technical assistance, which is

  the phrase used to describe the supply of skilled people. This

  is the most despised form of aid, but it is often essential. In-

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  215

  stalling the capacity is not enough: the donors must verify that

  the capacity is actually being used to enforce probity in pub-

  lic spending. This requires a forensic approach quite distinct

  from the cooperative nature of capacity building. Only where

  forensic scrutiny of a budget system has already certified it

  as satisfactory should aid be provided as budget support. Of

  course, if the donors introduced that as a rule tomorrow, they

  would not be able to disburse any money, and so there would

  need to be due notice and transitional arrangements. But there

  is simply no alternative: projects are largely an illusion, and so

  for aid to be effective, it requires sound budgets. If govern-

  ments want to spend aid money, this should be the condition

  for its use. I call it governance conditionality, to contrast it

  with policy conditionality. Donors should not be telling gov-

  ernments what policies to adopt, or, within the range of public

  goods, how money should be spent. But they have an obliga-

  tion both to their own taxpayers and to the citizens of the bot-

  tom billion not to connive in budgetary processes by which

  public money is diverted for private ends.

  If this were the condition for aid, some governments would

  decline it, in particular those with large revenues from natural

  resource exports. The international community has little finan-

  cial leverage over these governments, and a completely differ-

  ent approach is required to encourage financial probity. That

  would take us beyond this book. However, there is another cat-

  egory of country where, while the government might be willing

  to accept it, the task of building an accountable budget is simply

  unrealistic: the civil service has degraded too far for recovery in

  a reasonable time scale. Is there an alternative?

  Liberia is now ruled by reformers, led by the admirable

  president Ellen Johnson-Sirleaf. She was preceded by a govern-

  ment so insalubrious that even the normally pusillanimous do-

  nors drew the line. When they could no longer stomach what

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  was happening to their money, they threw sovereignty to the

  winds and introduced a system called GEMAP (Governance

  and Economic Management Assistance Program), in which the

  finance minister could not incur expenditure without a coun-

  tersignature by the donors. GEMAP is billed as a great suc-

  cess, but it was in reality a despairing reversion to colonialism.

  I talked to the reforming new minister of finance, Antoinette

  Sayeh, and she naturally wanted to move on from it. But to

  what? The donors surely trust Antoinette, but she cannot her-

  self ensure that public money is well spent. A corrupt finance

  minister can ensure that it is badly spent, but unfortunately the

  converse does not apply. A minister depends upon the staff of a

  ministry. The first act of President Johnson-Sirleaf was to dis-

  miss the entire staff of the ministry of finance. She was right to

  do so, but what do you do the next day?

  Instead of the desperate reactive policy of GEMAP, used

  only when the situation is manifestly out of hand, the interna-

  tional community needs to anticipate that in some situations

  conventional systems of accountability have degraded beyond

  rapid recovery. Since these are the situations in which needs

  are most desperate, an institutional design is required for how

  big money can nevertheless safely be spent on the provision of

  basic services.

  The model that virtually all the newly independent gov-

  ernments of the bottom billion adopted was, unsurprisingly, the

  prevailing European model of the 1950s: monopoly supply by

  government ministries. Even for Europe this model has proved

  a little problematic and there has been a move away from it, but

  for the societies of the bottom billion it was usually inappropri-

  ate and in some disastrously so.

  A more realistic design would separate the functions con-

  flated into these grandiose ministries: overall policy, the allo-

  cation of money to specific activities, and the actual supply of

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  activities. The ministry should be responsible only for overall

  policy. Indeed, only once policy is separated from the spending

  of money is the ministry likely to give policy serious consider-

  ation: at present attention is often driven by the scope for kick-

  backs. Where needs are dire and public systems have failed, the

  actual supply of basic services, such as running a school, should

  be open to all who can do it well. This is likely to mean churches,

  NGOs, local communities, and most promising of all, the new

  philanthropists, rather than government-run operations. I am

  enormously impressed by the professionalism, innovation, and

  energy shown by the new philanthropic organizations, typi-

  cally staffed by young people trained in business schools, who

  combine passion with an eye for cost-effectiveness.

  In between the ministry and these suppliers would be an

  agency that handled the money: contracting with the suppliers

  and monitoring the
ir performance, but working to objectives

  set by the ministry. This type of agency is the missing link: at

  present, governments spend the donor money and each NGO

  does its own thing, disconnected from public supply and largely

  unaccountable. The linking agency would enable donors to

  channel money to effective service delivery. In return, donors

  would share oversight of the agency with the government and

  local civil society. Would donor money channeled through such

  an agency still face the problem I sketched with projects? That

  is, if donor money funded the priorities of basic social spending,

  wouldn’t this simply release government tax revenue for other

  purposes? The answer is that in the broken societies like Libe-

  ria the economy has collapsed and along with it government

  revenue. In such societies there is an enormous need for aid,

  yet at the moment they get very little. They get little because

  donors know that public systems of spending are too dysfunc-

  tional to be used. Donors need to face up to the logical implica-

  tion: try a new system.

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  Would the governments of broken states accept such

  spending systems? If they were accompanied by the realistic

  prospect of vastly scaled up inflows of aid, I think most would.

  Proposal 3: The International Supply of Security

  It is time to turn from accountability to security: this is the pub-

  lic good par excellence for which the states of the bottom bil-

  lion are too small. Manifestly, its provision has been inadequate:

  that is why these states are so dangerous. For some public goods

  the lack of social cohesion that is endemic to the states of the

  bottom billion can be overcome by decentralization: if at the

  national level the public purse is viewed merely as a trough, it

  may be better to forgo some scale economies to gain a sense of

  common identity. But security is not one of those public goods:

  decentralized provision of security services would magnify the

  risks of civil war because it would create rival military forces

  controlled by rival politicians. Security services need to be sup-

  plied not on a smaller scale than the nation, but a larger scale.

  As with the other public goods, the high-income countries

  have been cooperating regionally on the supply of the public

  good of security for more than half a century. NATO is such

  a force providing mutual guarantees. Could neighborhoods

  within the bottom billion do the same? As I will set out, there

  is plenty of untapped scope for security cooperation among the

  bottom billion. But before going deeper, is this idea so wild as to

  be unthinkable? The United Nations has recently formulated

  a far more radical proposition: the responsibility to protect. R2P,

  as it is known in the preposterous shorthand of international

  parlance, is a full-frontal assault on the concept of national

  sovereignty. It proposes that the international community has

  the right to intervene to protect citizens from their own gov-

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  ernment. Compared with that proposition, the idea that I am

  suggesting is decidedly modest. At its most minimal it is that

  neighboring states would get mutual benefits from binding

  themselves to security cooperation. At its most ambitious it is

  that the neighbors of a country at risk of civil war have a right

  to protect their own citizens.

  It may be best to start by stating clearly what I do not have in

  mind. I am not proposing that the UN cavalry should ride in to

  topple President Mugabe, or to impose peace in Darfur. I regard

  these as distracting fantasies that impede security cooperation for

  less controversial and therefore more realistic purposes.

  So let’s begin with the least demanding: security coopera-

  tion that generates mutual gains. Think back to neighborhood

  arms races. If the neighbors are seen as a threat, then the mili-

  tary spending of each government becomes a regional public

  bad. Arms races do not enhance overall security; they waste

  money. Worse, as I showed, since some of the guns leak into the

  informal market, the higher the military spending in a neigh-

  borhood, the easier it is for rebel groups to get hold of guns:

  cheap guns increase the risk of civil war.

  Could the arms races in Lilliput be unwound in Africa, as

  President Arias is trying to do in Central America? An analogy

  is the mutual deescalation of tariffs negotiated through regional

  trade agreements. African governments have been negotiating

  regional trade agreements for years, but there is no equivalent

  for military spending. One reason is that there are too many

  players. Suppose that there was an arms race on an island di-

  vided into just two countries. It would be straightforward to

  negotiate de-escalation because the benefits are fully reciprocal:

  each country’s spending threatens the other.

  Unfortunately, mainland Africa is at the opposite end of

  the spectrum from such an island: there is a chain of neighbor-

  liness with forty-seven countries sharing the same landmass.

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  Zimbabwe is next to Zambia, but Zambia is next to the Demo-

  cratic Republic of the Congo. So the Democratic Republic of

  the Congo is a potential threat to Zambia but not to Zimbabwe.

  In turn, the Democratic Republic of the Congo is next to Chad,

  and so on. With a trade agreement it is possible to cut tariffs

  against some neighbors but not others: Zimbabwe and Zambia

  could negotiate with each other and reach a deal that excluded

  the Democratic Republic of the Congo. But if a country cuts

  its military spending, this benefits all neighbors regardless of

  whether they reciprocate. If Zambia cuts its military spending,

  both Zimbabwe and the Democratic Republic of the Congo

  benefit. If only Zimbabwe reciprocates, then Zambia has be-

  come less secure because it is now weaker relative to the Demo-

  cratic Republic of the Congo. So for a negotiated reduction in

  military spending to succeed, everyone has to agree to do it to-

  gether. Since it is a case of all or none, with so many countries

  in the region the inevitable result is stalemate. The cooperative

  provision of security sounds attractive but is extremely diffi-

  cult.

  Given that military spending is at least in part a regional

  public bad, it should be discouraged. Conceptually, the right

  way to discourage a public bad is usually to tax it: this is the

  principle behind carbon taxes. So if only the African Union

  could reach agreement, it should tax military spending, just as

  the Eurozone now taxes the regional public bad of excess bud-

  get deficits. Of course, the African Union is a long way from

  being able to initiate such regional cooperation, so is there an

  alternative? Recall that a public good that benefits a region may

  not most efficiently be produced in the region. Such is the case

  with the discovery of a
malaria vaccine: the benefits would be

  pan-regional, but the research needs the skill base found only

  in high-income countries. That is what makes the finance of

  the research for a malaria vaccine a particularly good use of

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  aid. The same may be the case for the regional public good of

  reduced military spending induced by a tax on military spend-

  ing.

  By linking aid to the level of military spending, donors

  could simulate a regional mutual tax. Recall, donors would

  have a very powerful justification for doing so: to date around

  40 percent of military spending has inadvertently been financed

  by their aid. Donors are subsidizing military spending when

  they should be taxing it! At present donors often try to discour-

  age military spending by huffing and puffing. It would be both

  less intrusive and more effective if their justified dislike for

  military spending was embodied into some clear rules of aid al-

  location: for example, starting from where military budgets are

  now, each dollar of increase would be taxed by a 40 percent re-

  duction in aid, which would be redistributed to other countries,

  and each cut in spending would be correspondingly rewarded.

  Unlike huffing and puffing, this could not be regarded as an

  infringement on sovereignty: it provides a regional public good.

  And being a clear and stable incentive, it would most probably

  be more effective.

  N ow l e t ’ s g e t m o r e a m b i t i o u s . So far security provision as an interstate public good has involved mutual gains. All governments want the same public good and security, and international

  provision improves the technological possibilities of supply. But re-

  member that music: my pleasure might be your pain, or more fan-

  cily expressed, my decisions might inflict negative externalities on

  you. Those externalities need to be internalized even if I don’t like

  it. We now get rather tougher on national sovereignty.

  Historically, the entire concept of national sovereignty arose out

  of the catastrophe of the Thirty Years War, during which govern-

  ments of rival religious allegiances fought it out to impose their pref-

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  erences over each other’s territories. By the end of the war the astro-

  nomic costs of warfare were better appreciated and the bloody game

  of religious conversion by conquest was recognized as not worth the