TEXT OF COMMENTARY
KAI RYSSDAL: John Authers was just telling us about the potential, and the perils, of what have come to be called “frontier markets.” Their popularity has come in part because of the global boom in oil and metals. Rising commodity prices are bringing in big money.
Commentator Paul Collier says it’s a moment poor countries can’t afford to squander.
PAUL COLLIER: Many of the world’s poorest nations now have a big opportunity. They’re sitting on commodities which are hugely valuable on global markets. This is their best chance for transformation, but we’ve been here before.
The last time this happened was the boom of the 1970s, but that opportunity was not utilized for sustained growth. Take Nigeria. The nation brought in around $100 billion from the oil spike, but instead of putting that money into developing the nation’s economy, politicians used it to throw a party.
International standards could address the key government decisions that determine whether commodity revenues are utilized for development. For example, how should the right to extract commodities be sold? To date sales have often been private deals between ministers and companies. That way companies bribe or outsmart governments at the expense of their citizens. If instead the rights were sold through auctions, companies would have to compete openly. The true value would be revealed through competition among the bidders. The distinctive feature of a commodity auction is that all the suitors are sophisticated corporations, so there are no bargains. Auctions of this sort have the potential for misconduct, so they would need to be internationally verified.
Each key decision could be guided by standards. Citizens would then know what to demand of their governments. Those that refused to adopt them would be revealed as crooked.
If international standards were voluntary, would they be effective? Well, we already have one, and its working. In 2002 Tony Blair launched an initiative for governments to tell their own citizens what revenues they receive. It was seized on by reformers in Nigeria, and many governments have now adopted it. Revenue transparency was the right place to start, but it would be the wrong place to stop. The populist pressures to use revenue booms for a party are strong, and guidelines can help to counter them. They help because reformers are only human and can easily fall out. A standard provides a common rallying point. Reformers in the bottom billion are struggling to prevent a repeat of history. We can help them.
RYSSDAL: Paul Collier’s latest book is called “The Bottom Billion.” He’s the director of the Center for the Study of African Economies at Oxford University.
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