Since the dawn of civilization, resource acquisition and management has been of utmost interest. As populations grow, so do their demands for basic goods. The advent of the steam engine and the Industrial Revolution that soon followed brought about a new demand for fossil fuels such as oil and coal and minerals such as copper and lithium. If the success of civilizations of yore was often predicated on the availability of arable, fertile land, it would stand to reason that the same would apply today to fossil fuels. Why is it then that resource endowed states such as Bolivia, Venezuela, and Libya have all struggled to develop and maintain their own democracies?
Many resource rich countries, contrary to their natural wealth, tend to lack the robust economies and democracies necessary for improving public welfare. In political economics this is a phenomenon known as the “resource curse”. This so-called curse is the result of several factors, and its political impacts diffuse. I’ve decided to highlight some of the main causes of and effects this phenomenon has on democratic governance.
One of the greatest implications natural resource endowment has on democracy can be found in taxation. Under normal circumstances, governments are beholden to their citizens through taxes, and vice versa. When a government exacts their revenues through taxation, the citizen feels directly linked to the national budget. Decisions made by that government are restrained or enabled by the money they collect from an individual’s consumption (sales tax) or income. This is not so much the case in resource-rich countries. Oftentimes these countries source the vast majority if not all of their national budgets through the direct sale of resource revenues to either its citizens, international extraction companies, and other countries. This leads to two issues: first, citizens feel less invested in their national budgets, creating a sense of general political apathy. Second, government officials may feel less beholden to their constituents demands, furthering this sense of apathy.
Just as resources are spread unevenly throughout the world at the macro scale, at the micro scale, even within countries and regions these resources can be spread out disproportionately. As a result, certain regional groups may stand to gain more from resource extraction than others, consequently furthering unequal distribution of wealth within a country. Therefore it stands to reason that the second threat the resource curse poses on budding democracies is its tendency to promote both internal and external conflict. According to research and advocacy group Oil Change International, countries that produce oil are 50% more likely to have civil wars, and that between a quarter to a half of interstate wars since 1973 could be considered at least partially the result of states’ conflicting oil interests. The newly coined term “petro-aggression” refers to this tendency for oil-producing states to either instigate or become the victim of foreign conflict.
Finally, one of the greatest implications the resource curse has on governments is its ability to further entrench and build the resolve of autocracies, while in turn reducing the individual citizen’s ability to hold leaders accountable due to lack of transparency of state revenues and loss of investment outside of extractive business sectors. When a large resource deposit is found in a region, both private and public elites shift investments away from job-creating business sectors such as manufacturing and agriculture towards extractive ventures, oftentimes relying on international extraction companies to invest as well, in turn reducing domestic capture of revenues. These effects are twofold: one, as outlined above, it reduces the transparency of governmental revenues, in turn reducing the ability of individual citizens to hold their governments accountable for mismanagement of funds. (Increased security spending?) Second, hinders economic development, tying much of a nation’s economy to commodity markets and reducing investment in non-extractive job creating ventures such as manufacturing and agriculture. This lack of economic diversity leaves citizens beholden to the whims of commodity markets, while reducing the availability of jobs outside of extractive enterprises.
Where do we see this playing out? In 2011, just as its ongoing civil war began to break out, NPR reported Libya as attributing a whopping 98% of industrial activities to its oil and gas industry. Much of the country’s oil revenues were being spent by Moammar Ghadafi on increasing security for both himself and for points of extraction (oil wells, pipelines, refineries, etc.). As a result, according to Professor Mansour Al-Kikhia, in early 2011, an estimated 40% of Libyans were unemployed. While the Ghadafi regime was eventually toppled as a result of massive popular revolt during the Libyan Arab Spring, the resulting civil war is ongoing to this day, with much of the fighting being done over control of oil facilities.
As our climate changes and non-renewable resources become scarce, it is important that question the role of fossil fuels in our development and its impacts on government’s decision making. Much of what allows autocratic regimes to maintain control over their own citizens is contingent on the demand of democratic states. To bring about positive change it is important for democracies moving forward to invest in renewables to lessen the impact of this Resource Curse.
Works Cited
https://resourcegovernance.org/sites/default/files/nrgi_Resource-Curse.pdf
I appreciated your post on the effects of natural resources on a country’s ability to implement and maintain democratic standards. I had never actually thought of it from the taxation perspective, but it makes perfect sense. Taxation is an important way for the public to influence, and more importantly, feel as if they have an influence on the activities of their government; I think of “no taxation without representation” in revolutionary America. So it would make sense that those economies based not on income and sales taxes but on the production and trade of natural resources would miss out on this opportunity. I think that these governments have a responsibility to prioritize their own citizens over foreign companies. There’s a circular problem with electing such leaders and having them maintain office. But as you added, nations that benefit from these resource-rich states may also have a responsibility to respect the interests of economically developing nations, although that sounds like wishful thinking.
I’m always interested in how other governments, foreign corporations, and intelligence agencies take advantage of this “resource curse” and it’s definitely something that would be interesting to explore.