A talk worth watching is Paul Collier’s heartfelt presentation at the TED event earlier this year. He talks a bit about his book The Bottom Billion which, as a non-economist, I am finding both insightful and accessible. He talks about the critical role of good governance for poor countries with significant natural resources. He points out that, without good governance, natural resource wealth turns out to be worse for poor countries than if they hadn’t had those resources at all.
This is pretty depressing. Not surprisingly natural resource wealth in poor countries tends to get “captured” by those in a position to do so and leads both abuse of power and market distortions which, after a brief wave of prosperity, renders the poor, in particular, even worse off than before.
What is most interesting though for me is the solution that he proposes… Open Standards. Standards for transparency in natural resource extraction that can be adopted by companies and by countries such as those proposed by Transparency International could be a powerful mechanism if widely adopted.
As an example, Collier talks about the British Treasury’s sell-off of 3G spectrum licenses in which an estimated market of 2 billion pounds sold for 10 times that much when put through a “verified auction”. He appears to imply that verified auctions are a kind of existing standard but in reading the story of the auction and the conclusions of Paul Klemperor it appears that there is no one-size-fits-all solution and auctions must be carefully designed to fit markets and market players.
With that cautionary note, it still seems like a great idea. One has the sense that the people who want to do the right thing are in the majority, they just don’t know how to go about it. And while they cast about for solutions, the process is captured by the greedy. The SA telecommunications sector comes to mind here. Also, the existence of international standards can give weight to the arguments of those who would like to do the right thing. And finally, international standards can give civil society a measure to judge governments and corporations by, if not a stick to beat them with.
There is little question that the open, voluntary standards process of “Requests for Comment” (RFCs) which evolve into de facto standards through partcipation has been a key element in the phenomenal growth of the Internet. Perhaps there is something to be learned from that.