CGD and SAIS hosted a seminar with Paul Collier, Professor of Economics at Oxford University. Collier presented the paper, "Development Effectiveness in Fragile States: Spillovers and Turnarounds." Stephen Knack, Development Research Group, The World Bank was the discussant.
ABSTRACT: A ‘failing state’ can be defined in various ways. In political science it has come to mean a state which is not able to maintain internal security. We give the term an economic meaning: a failing state is a low-income country in which economic policies, institutions and governance are so poor that growth is highly unlikely. The state is failing its citizens because even if there is peace they are stuck in poverty. The failure may well, however, be wider. Empirically the combination of poverty and stagnation substantially increase proneness to civil war. Through various routes the state may become a hazard to its neighbors and conceivably to the world. The international community recognizes that such states are a problem, but is unclear what to do about them. One strand of the aid effectiveness literature suggests that the absorptive capacity for aid might be limited in these environments. The idea of more direct international replacement of the state, through trusteeships, is under active discussion. The primary purpose of the present paper is to investigate empirically the conditions under which failing states decisively turn round, achieving and sustaining radically improved policies, institutions and governance. We investigate both the preconditions for such turnarounds, and the conditions under which incipient turnarounds are most likely to continue to fully fledged transformations. We focus particularly upon aid, both money and technical assistance. Is aid of either form effective in promoting these transformations? Conditional upon aid being effective, a consequential is whether it is cost-effective. The secondary purpose of our paper is to estimate the benefits of turnarounds and compare them to the costs of those instruments that are effective in promoting them.