Academic journal article Middle East Quarterly

Oil Booms and Business Busts: Why Resource Wealth Hurts Entrepreneurs in the Developing World

Academic journal article Middle East Quarterly

Oil Booms and Business Busts: Why Resource Wealth Hurts Entrepreneurs in the Developing World

Article excerpt

Oil Booms and Business Busts: Why Resource Wealth Hurts Entrepreneurs in the Developing World. By Nimah Mazaheri. Oxford: Oxford University Press, 2016. 214 pp. $74.

To understand why states rich in natural resources have such poor economic growth records, economists invoke two complementary theories. The "Dutch disease" is the macroeconomic factor: Resource earnings that accompany the sale of a natural resource cause a country's currency to appreciate, making its other products less price competitive on the global market. "Rent seeking" is the microeconomic factor: Rather than engage in productive economic activity by creating new wealth, economic players pursue benefits from the government.

Mazaheri, a political science professor at Tufts, provides an important supplement to these standard views. He demonstrates that resource windfalls- especially through oil production-not only enrich business elites but amplify their determination to block entrepreneurs and new businesses from enriching themselves. Simultaneously, they dampen policy makers' interest in reforms that might create a better business environment for small and medium enterprises. He offers a good theoretical argument for why this can be expected, grounded in solid empirical evidence. …

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