MONEY FOR NOTHIN'

Striking It Poor: Oil as a Curse (DAPHNE EVIATAR, June 7, 2003, NY Times)

Some of the most important research on the resource curse has been done by bank economists. In a pioneering 1988 book issued as a World Bank
Research publication, "Oil Windfalls: Blessing or Curse?," Alan H. Gelb, chief economist for the bank's African regional office, found that contrary to assumptions popular at the time, oil wealth had made conditions in most countries worse. And Paul Collier, an Oxford University economics professor who now heads the bank's development research group, has demonstrated repeatedly that oil, gas and mining wealth has fueled brutal civil wars. Advocacy groups have used these findings to urge the bank to stop supporting oil and gas projects. [...]

Terry Lynn Karl, a political science professor at Stanford University and author of "The Paradox of Plenty: Oil Booms and Petro-States" (University of California, 1997), argues that Chad would be better off without the pipeline.

"Revenues flowing through incapable or corrupt structures will give you perverse outcomes," she said at the Washington conference. Not only is the money going to be put to bad use, she predicted, but encouraging dependence on natural resources also tends to result in corruption and a single-industry economy: "When the crisis comes, it's much worse than it would have been otherwise."

The notion that a resource like oil may not be a boon is a point that Bernard Lewis makes with regard to the Middle East, but there's an interesting aspect that he emphasizes, apart from corruption and dependence: because such wealth is not produced by the citizenry and the state does not have to tax its people in order to fun its operations, it makes possible non-consensual government and tends to distance rulers from ruled. One need only consider the way in which tax revolts have driven Anglo-American history to see the wisdom of this idea. Posted by Orrin Judd at June 7, 2003 5:39 AM