June 22, 2004
NO REPRESENTATION WITHOUT TAXATION:
Oil as a curse (Amity Shlaes, 6/22/04, Jewish World Review)
[T]here was a sense of relief when Putin said the Russian government did not want to smash Yukos altogether.But perhaps there ought not to have been. That, at least, is the conclusion we can draw from an article by Nancy Birdsall and Arvind Subramanian in the newest issue of Foreign Affairs. The authors — Birdsall heads the Washington-based Center for Global Development, while Subramanian is at the International Monetary Fund — offer a one-word explanation for the globe's diverse troubles: oil. [...]
The market-oriented right has bridled at the idea that any capital, even petro-capital, is evil. Then, in the last century, free-market thinkers such as Mancur Olson and P.T. Bauer pointed out that the natural resources themselves, and not the colonizers, were the problem. Indeed, a lack of oil constitutes an advantage. Japan, West Germany and Singapore all profited when, absent what nature provides, they were forced to develop industrial or intellectual capital.
Now Birdsall and Subramanian are adding to the debate. They note that oil wealth relieves a nation of the pressure to tax (Saudi Arabia). The state therefore has no stake in the private-sector creation of wealth or citizens' day-to-day well-being. There is no need for a civic relationship — on either side. Property rights, contract law, reliable courts — to us, basics — seem dispensable. And the state is free to bully.
That's how Bernard Lewis stated the case in What Went Wrong?. Posted by Orrin Judd at June 22, 2004 9:16 AM
Makes sense - it's analogous to the role of inherited wealth creating a dissipated, lazy progeny.
Posted by: Bruce Cleaver at June 22, 2004 9:30 AMWatch it, Cleaver.
Posted by: oj at June 22, 2004 10:24 AMBruce:
Right, and that can also lead to weird fantasies about virgins in paradise or being spanked by no-nonsense middle-aged politicians.
(Actually, Orrin, as I write this I suddenly wonder whether this couldn't be used as an illustration of the clash of civilizations.)
Note that oil reserves only relieve the need to tax if the oil is nationalized. If it is left in private hands, the government still must be concerned with the machinery of property and taxes. It is the lack of markets, not oil per se, that's the problem.
One notes that Germany had plenty of coal, which was as significant as oil in its heyday yet avoided the traps of most of OPEC.
Well, Germany has been busy extricating itself from other traps this past century.
Posted by: jefferson park at June 22, 2004 11:36 AMThere's an interesting irony, on how not to handle this. Daniel Yergin's The Prize, among
others, points out how the Texas Railway Commission, the product of the responsible
progressives, was the model for 'reform'
efforts in Venezuela, and Saudi Arabia, the
first under Perez Alfonso, the first OPEC
chair, and the latter, the emeritus chair
now held by Saudi Arabia, although most
recently held by a Chavez crony, a former
Nasserite/Baathist-phile guerilla named
Ali? Rodriguez
Oil only relieves the nation of the pressure to tax if the government directly controls all of the oil revenues. Oil wealth didn't hurt Texas. But then neither the Texas nor US government owned the oil wells. Same is true in the North Sea.
Posted by: Brandon at June 22, 2004 12:35 PMIf history is a guide, Brandon is right. The surest way to destroy the potential social benefit of natural wealth is communal ownership and direction through the state. How it is taxed, (assuming a rational electorate whose government is restrained by the rule of law) would seem to be almost irrevelant.
Posted by: Tom Corcoran at June 22, 2004 2:05 PMBrandon;
It's also the case that oil is (was) a small fraction of the economy in both places, as opposed to the majority. While I don't believe, it, one can make a case that the lack of economic diversity is the problem and not nationalization.
Posted by: Annoying Old Guy at June 22, 2004 8:21 PMThen, of course, Alaska is headed down as well.
I remember, otherwise sane folks, arguing that Iraq's oil should be 'nationalized' in the sense that all citizens should get their 'cut' of the loot.
Bushwah.
Posted by: Uncle Bill at June 22, 2004 8:22 PM