Day by day, electric cars, online food deliveries and smart watches become the norms of our developed world. Whilst we live like this, others struggle with conditions of absolute poverty. The gap between us and the so called ‘bottom billion’, the poorest billion people in the world, seems to be ever increasing. Having already experienced the process of globalisation ourselves, these countries look to encounter the same ‘westernised’ journey. 

The issue is that this system isn’t working for everyone. Stuck in constant spirals of war, conflicts and bad governance, when able to finally break free of these traps, the bottom billion cannot develop and thus fall back into the same cycle.

There seems to be three major aspects that are not forthcoming and thus prevent this process of development: trade, investment and migration. 

The first key aspect of globalisation is trade. We have seen the fast development of China and India whose economies are now primarily based upon international trade. But why is this process not working for the bottom billion? The key difference between the trade of developing countries and the bottom billion is that 80% of the developing countries’ exports are ‘developed goods’ meaning they have added value to raw materials. 

Hence, they have export diversification. Many of the economies of the bottom billion are completely reliant upon one commodity, usually an agricultural natural resource such as coffee or oil. Being such volatile goods, this puts their economy at the whim of commodity prices, a high-risk scenario. In other words, diversification helps to prevent adverse terms of trade shocks by stabilising export revenues. For example, Angola is now looking to diversify its exports with a current reliance of 95% of its exports on oil. After oil prices hit an all-time low during the COVID-19 pandemic, the significance of export diversification for this poverty-stricken country became increasingly apparent.

Unfortunately, Africa seems incapable of attracting the same manufacturing scene that pulled Asia into the developing world.  This all comes down to the economics of agglomeration, which are regional economies of scale. When more than one firm produces goods in one area, the cost of production is likely to reduce. This could be down to established low transport costs or a local market or accumulation of human capital, but this is the issue preventing firms from moving from Asia to Africa. 

We know that when the first firm moved from Europe to Asia for manufacturing purposes it would have been far more expensive for them than any of the market followers who also later moved their manufacturing plants. What the bottom billion needs is for rising wages in the East to make the cost of production comparatively cheaper in Africa, thus encouraging the relocation of firms. 

However, other arguments herald good news. In a Ted Talk, Charles Robertson, Emerging Markets Economist, explains how Africa’s boom will be led through a changing demographic. When China began its manufacturing empire, the country was full of young people, desperate for work at any salary. Firms were drawn to them due to the low-cost workers. However, throughout this decade we will witness a 20-30% decrease in the number of 15–24 year-olds in China. By contrast, the number of young Africans is only going to increase. 

Furthermore, the crucial turning point for Africa is the increased level of youth education. In 1975 only 9% of children had a secondary education in Sub-Saharan Africa. An increase in education is driven by the substantial difference that most African people are now living in a democratic society focussed on reform and improved policies with a heavier weighting on education and healthcare. 

Democracy will help these governments to further invest in education, which will stimulate growth by attracting more investments, specifically the manufacturing industry. This could take these families now working in textile jobs out of absolute poverty and support a competitive service sector, increasing the level of export diversification – all thanks to political stability.

A second key aspect in the process of globalisation is investment. This can be split into two types: supplied public capital and private capital. Public capital includes infrastructure such as motorways and airports, whilst private capital is the equipment that a country needs in order to become productively efficient. In more affluent areas than the bottom billion such as Asia there is more than double the amount of private capital than public capital. In Africa, it is the reverse. This lack of investment is mainly down to the risks associated with investing in the bottom billion. The political instability and high conflict, as mentioned earlier, makes the investment opportunities less attractive and prevents these countries from developing in the typical way the western world has experienced. 

A final aspect to consider in the process of globalisation is migration. Although migration can help to evolve an economy through migrants sending remittances to their home country that would not have otherwise been spent in the local economy, usually those who leave tend to have the highest levels of education: Citizens with a lower degree of education lack the incentive to migrate as they know they fall short in the necessary skills to obtain employment. What’s more, after developing a life in another country, there is a higher likelihood that their family may even join them impeding any positive consequences that could have come out of the original relocation. 

Hence, without sustained public or private investment, a less risky strategy of diversified trade and a reduced risk of migration causing a “brain drain”, there seems to be a dark shadow cast on the development of the bottom billion.  In order to get the opportunity to get a seat at the table in this global game, the bottom billion needs to be liberated from the traps and spirals in which they so often find themselves. 

Globalisation may have left ‘The Bottom Billion’ behind, but given these conditions, it can also be their saviour. 

Flo Stephens