No Natural Resources? Lucky You! Countries with More Human Than Natural Resources Tend to Be More Democratic and Entrepreneurial. as Oil-Producing Countries See Petrodollars Dry Up, They May Invest More in Their People Resources Instead

Article excerpt

Roger Howard presents plausible scenarios regarding the geopolitical dangers of peak oil. Equally plausible scenarios could envision some positive impacts, because countries dependent on natural resources are often poor and undemocratic, while countries dependent on human resources are often rich and democratic.

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Countries with natural resources invest in resource development. State wealth derives from royalties rather than from taxes paid by citizens producing products and services. No social contract between governed and governors is created. In contrast, countries without natural resources must invest in their citizens in order to generate national wealth. This establishes a social contract between taxpaying citizens and government and leads to the creation of independent worker and managerial classes as well as a significant higher education system. The components of constitutional democracy thus evolve.

Countries dependent on human resources tend to democratize fairly quickly (in historical terms) since they require constitutional protections of real and intellectual property, transparency, and freedom of human initiative. The examples of South Korea and Taiwan come to mind. Fifty years ago, both could have justifiably been termed fascist dictatorships. Today they are constitutional democracies--perhaps not on a Western model but still a long way from dictatorship. Autocratic Singapore has also had to democratize.

Even communist China has developed extensive entrepreneurial and managerial classes and has legislated guarantees regarding personal and corporate property. It is also increasingly coming in line with international standards of intellectual property. Once standards of due process and objective law "infect" any part of a legal system (usually beginning with property rights) the "infection" spreads throughout the rest of the system and concepts of human and civil rights follow quickly (in historical terms). Competition for natural resources generates instability; competition based on trade requires stability.

Let us turn to specific oil-producing countries. First, it seems obvious that Norway, Canada, and Mexico will neither invade their neighbors nor implode. Howard's forecast of implosion, domestic unrest, and aggression against neighbors is most likely to be realized in Iraq and Nigeria.

Indonesia has recently left OPEC and become an oil importer. This seems to have had a stabilizing effect (regionally and locally) rather than the opposite. As oil production has plummeted, Indonesia has grown more democratic, with stronger constitutional protections and transparency. This is because Indonesia's economic development now depends on increased trade of industrial products and services in the global economy. In other words, Indonesia must follow the same path as the other Asian economic miracles.

Russia has immense natural resources besides hydrocarbons. It also has highly educated human resources. Russia needs regional stability to retain China as a market for natural resources. It also needs good relations with the European Union as a market for both natural resources and the products and services generated by Russia's human resources. Russia will need growing direct and indirect foreign investments, requiring constitutional protections and transparency--something that oil and gas revenues obviated. …

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