The so-called "traps" are conflict, natural resources, landlocked with bad neighbors, and bad governance in small countries. What does Collier mean by "traps"? These are not black holes of failure from which countries shall never return, rather, these four traps (conflict, natural resources, landlocked with bad neighbors and bad governance) are difficult to escape from and can potentially lead to cycles of poverty. In an effort to help my class remember the key content from those chapters I came up with the following mnemonic: DUMP SID NOT CARL. To our single female readers: you are welcome for the free advice.
*Notice in the last sentence I said "can help". Why didn't I use the stronger statement "will help"? Dutch Disease. There is this idea in economics that large natural resource endowments can actually harm an economy. For example, imagine that a country is a big exporter of motor scooters when suddenly some in-land farmers are shooting dinner and that good ol' black gold bubbles up. Now the country exports oil and motor scooters, but, their scooter market is in shambles because the value of the currency has gotten so high. Why is the currency high? When you buy a country's goods like oil you buy their currency. As more people are demanding the country's currency (to buy the oil) the value of the currency increases. What does this have to do with scooters? Where an importer of scooters would only need to pay $50 per scooter before they will now have to buy the country's more valuable currency in order to import the same scooter. Now it might cost them $70 for the same scooter. Maybe they will buy elsewhere. What can combat Dutch Disease? We'll get to that in the next post.
The profits to power from controlling a natural resource leads into a core idea Collier has called Survival of the Fattest. Normally in electoral competition the politician who promotes the best mix of policies wins the election. This would be Survival of the Fittest. In countries with large natural resource endowments however this kind of electoral competition does not take place as easily due to corruption. Instead, politicians in these crooked regimes can use the profits from the natural resource to buy votes. Moreover, their corrupt practices keep potentially good politicians from entering the political process because they can see everything is rigged. Such a rigged process and the wealth it creates for the select few in higher ranks of government also attracts more power hungry. Over time the integrity of the government disintegrates.
What keeps a country free from falling back into all these traps? Stay tuned.