Open a newspaper today and you’ll be bombarded with a panoply of terrible news. Ebola is ravaging West Africa, with a projected 10,000 new cases per week and the possibility for 1.4 million people infected in Sierra Leone and Liberia alone. Two decades ago, those same countries were embroiled in one of the most horrific civil wars in modern history. A few thousand miles away, a possible genocide in the Central African Republic has been unfolding – largely unnoticed – since the end of 2013. Head south and you’ll find never-ending violence in the Democratic Republic of Congo that has claimed the lives of 5.4 million people since 1998. Outside Africa, uprising and rage are threatening to topple the government in Yemen, and Haiti struggles to recover from the earthquake that killed 160,000 people. The list goes on and on. Beyond the penchant for inflicting misery on the people who live in them, these countries share a common bond.
Among the 196 nations in the world, some countries, it seems, consistently draw the short straw. There is no shortage of colloquial terms for them – basketcases and failed states, to name a few – but the United Nations has a specific designation for countries that occupy the bottom of the human and socioeconomic development indices: the “least-developed countries”. Of the 48 countries to receive the ignominious distinction of being considered an LDC, only four have ever graduated to “developing country” status: Botswana, Cape Verde, Maldives, and, until 2014, Samoa. The LDCs have 880 million people, or 12% of the world’s population, yet they contribute 2% of its GDP and 1% of its global trade in goods. With so many people, the question is: why do these countries have it so bad?
Before examining the underlying causes, let’s first define what it means to be a least-developed country. Here is the United Nations’ description of the attributes that warrant the distinction:
The Least Developed Countries represent the poorest and weakest segment of the international community. Their low level of socio-economic development is characterized by weak human and institutional capacities, low and unequally distributed income and scarcity of domestic financial resources. They often suffer from governance crisis, political instability and, in some cases, internal and external conflicts. Their largely agrarian economies are affected by a vicious cycle of low productivity and low investment. They rely on the export of few primary commodities as major source of export and fiscal earnings, which makes them highly vulnerable to external terms-of-trade shocks. Only a handful has been able to diversify into the manufacturing sector, though with a limited range of products in labour-intensive industries, i.e. textiles and clothing.
These constraints are responsible for insufficient domestic resource mobilization, low economic management capacity, weaknesses in programme design and implementation, chronic external deficits, high debt burdens and heavy dependence on external financing that have kept LDCs in a poverty trap.
There is a lot to unpack in that statement, but, suffice it to say, LDCs are in a tough spot. Most of the people are subsistence farmers, growing just enough for themselves and their families, and relying on nature for their livelihoods. More than 70% live in rural areas, compared with 55% for other developing countries. They struggle to get by and move from crisis to crisis with little opportunity to implement systemic changes and reforms that will break the cycle of poverty and stagnant growth. With much of the population growing just enough to feed their families, the people are one natural disaster, family illness, or armed conflict away from the edge. They are the proverbial sailors in the boat with a hole in the bottom, bailing out just enough water to keep them from sinking any further. Only these boats are trying to stay afloat amidst raging seas, and a big enough wave – in the form of an earthquake or cyclone, a planned genocide, or an ultra-deadly virus that kills more than 70% of people it infects – is enough to tip the boat and send the sailors overboard, reversing any progress they have made in the past.
The question is: why these particular 48 countries? Economists have different underlying causes, ranging from the strength of institutions to the physical attributes of the geography. In the next few posts, I’ll review at a high level three arguments from three different books: Why Nations Fail, by Daron Acemoglu and James A. Robinson, Collapse: How Nations Choose to Fail or Succeed by Jared Diamond, and The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It, by Paul Collier. In the end, I’ll weigh in on the question myself and give my own opinion, though, as a mere dilettante in the field of development economics, your humble correspondent warns you in advance of the dangers of listening to him.
In the next post, I’ll cover some of the theories explaining why LDCs are so poor.
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