Image copyright of K R Ranjith (flickr)

One of Economics’ strongest exports was the economist Adam Smith.

In his book “The Wealth of Nations” Smith made the seemingly paradoxical claim that if people follow their own self interest, this will have the remarkable effect of increasing the overall benefit too society. This seemingly simple principle unfortunately took Adam Smith 1,260 pages to say. (Unfortunately very few economists have ever learnt the art of being concise.)

Adam Smith has become synonymous with free market economics. However, people often forget this Scottish intellectual
was primarily a professor of moral philosophy at Glasgow University.

At any rate this contradictory yet accurate argument about the free market remains the centre of all major debates in economics.

Is unbridled free-market Capitalism really the best economic system?

Even the most ardent free market economist cannot ignore the fact capitalism creates inequality and if you just look around this inequality is painfully evident. Thus many economists came along to challenge the free market ideologies of Adam Smith.

This takes us to our next great economist- Karl Marx

West Bengal is an eastern state in India with a population of around 82 million, the fourth most populated state in the eastern region of India. Tina is finding out about microfinance and the effects it has on individuals and communities. She is also looking at development issues within India and successful policies that have been advocated by economists.

While in India, Tina has been filming her discoveries and experiences. You will be able to view this film on this site when she returns in December; meanwhile, you can follow her journey through her blog.

Mohammad Yunus is a great believer of microfinance and its strengths. In 2006 he shared the Nobel Peace Prize with the Grameen Bank due to his pioneering ideas. He was the founder of the Bank which has ‘reversed the conventional banking system by removing the need for collateral and creating a banking system based on mutual trust, accountability, participation and creativity.’ (Grameen Bank)

For further reading see the Nobel Peace Prize 2006

These were the central messages of Professor Paul Collier when he delivered the 2006 Royal Economic Society Annual Public Lecture ‘ War and Peace in Africa’ at the Wigmore Hall in London on Friday 1 December.

Five sixths of the world’s population are already prosperous, or at least on track to be so. But the billion at the bottom face far lower life expectancy, higher infant mortality and economic stagnation that means they are poorer now than 40 years ago. Collier described the four traps that define the countries of the bottom billion: civil war; natural resource wealth; being landlocked; and bad governance.

To break the conflict trap, there are two points of intervention: post-conflict; and deep prevention. Since around half of all civil wars are post-conflict relapses, and since these happen in only a few countries, getting post-conflict to work is a good place to start. It is particularly pertinent at the moment because there have been a lot of recent peace settlements.

So what can be done in post-conflict situations? There are essentially four solutions for relieving the poverty of the bottom billion more aid; freer trade; increased security; and improved governance. We can more or less forget about trade: Afghanistan isn’t going to export anything soon, except drugs. Aid has already improved a lot. Much needs to be done about laws and charters.

But security in post-conflict societies is key and will normally require an external military presence for a long time. Both the sending and recipient government should expect this presence to last for around a decade and commit to it. Much shorter than a decade and domestic politicians are liable to play a waiting game rather than building peace and firms are likely to be wary of investing. Much longer than a decade and citizens are likely to get restive about foreign troops in the country.

To be effective and external presence requires troops with a mandate to fight to preserve the peace, and contributing governments willing to accept casualties. In return for this external security guarantee, the post-conflict government should be required radically to downsize its own army. While the military should be run down, there is likely to be a need for an expanded police force to deal with a crime wave as the violent diversify from war to crime.

Professor Collier said:

Public opinion is vital for appropriate military intervention. We have had two extremes.

On the one hand, public opinion has been fed the hype surrounding the initial invasions of Somalia and Iraq the photographers on the beach in Somalia and shock and awe in Iraq. On the other hand, we have seen the cringing feebleness of the UN forces in Rwanda and the Dutch at Srebenica.

Public opinion has to come round to supporting interventions like Sierra Leone. If Iraq is allowed to become Somalia 2, ‘never intervene’ then await Rwanda 2.

For further information: contact Romesh Vaitilingam, RES Media Consultant, on 07768-661095 (romesh@compuserve.com)

Notes for editors: The 2006 Royal Economic Society (RES) Public Lecture, ‘War and Peace in Africa’ by Professor Paul Collier, was delivered at the Wigmore Hall in London at 3.30pm on Friday 1 December.

Paul Collier is Professor of Economics at Oxford University and Director of the Centre for the Study of African Economies. For five years he has Director of the research department at the World Bank, brought in by Joe Stiglitz, and he was senior adviser to the Commission for Africa. His forthcoming book is The Bottom Billion: Why the poorest countries are failing and what can be done about it (Oxford University Press, Spring 2007).

Related information: Read more items from Paul Collier via EconPapers or look for more Internet sites about the issue of Development Economics at Intute: Social Sciences.

Collier points out that Africa has some fragile democracies which are at real risk of falling to a military coup or descending into civil war. The security that comes from stable government makes it more feasible to escape the cycle of poverty. Hence the rich European countries could help by supplying some of their military power, if backed with a legitimate authority.

Yunus pioneered microfinance; small loans made to people whom traditional banks would ignore as too high-risk. Talking to the BBC, he responded, “As a Bangladeshi, I’m proud that we have given something to the world. Our work has now been recognised by the whole world.” Several links found via MetaFilter.