Paul Collier on investing in investing for the bottom billion:
… in Africa the average investment rate to GDP is less than 20 percent, whereas to catch up, to converge with other economies, it needs to be over 30 percent. So they must move from under 20 to over 30. … It means an agenda of raising the capacity to invest productively. I call that a phase of investing in investing. It is something that has partly a macroeconomic agenda, but also a microeconomic agenda. If we just say it’s hopeless, the country doesn’t have a capacity to invest, it drives them into what I call the economics of Polonius: “Neither a borrower nor a lender be.” … That is the strategy for investing in investing, building the capacity to make good investments.
[…] the typical low-income country should be investing something like 30 percent of GDP. And for low-income countries that are depleting natural assets, it should be higher than that. […] We need a phase of investing in investing, and this goes back to my earlier point. An investing-in-investing phase is even more important in the resource-rich low-income countries.
[…] Typically, there is somewhat of a bypass of the domestic construction sector by bringing in foreign construction firms, and that’s throwing the baby out with the bathwater because potentially the construction sector can generate a lot of employment in these economies; in postconflict situations, that’s enormously valuable. In technical terms, the shadow wage of young men in postconflict environments is negative. It’s worth spending money employing them even if they were to do nothing. But actually you can get them productively employed in the construction sector.
And on the role of IMF:
I think that there are three different roles for the IMF. First, for governments of low-income countries, the Fund is a source of money. Second, the Fund provides a commitment framework for donors through its programs. And the third role, which I think is the most important, is one of providing a conceptual and coordination framework to assist the many different players in the low-income development field, including various agencies and the different governments. But my larger point is that the right macro answers depend on resolving the micro and institutional issues. The right macro answers, taking the micro and institutional as given—which is what the IMF has been doing—are the wrong macro answers for development.
