The Oil Curse: How Petroleum Wealth Shapes the Development of Nations

By Michael L. Ross | Go to book overview

CHAPTER TWO
The Trouble with Oil Revenues

The spirit of a people, its cultural level, its social structure, the
deeds its policy may prepare—all this and more is written in
its fiscal history, stripped of all phrases. He who knows how
to listen to its message here discerns the thunder of world his-
tory more clearly than anywhere else.

—Joseph Schumpeter, “The Crisis of the Tax State”

JUST AS PEOPLE are affected by the kinds of food they eat, governments are affected by the kinds of revenues they collect. Since most governments receive the same kinds of revenues year after year, it is easy to overlook their significance. Only when there is a sharp change in these revenues, such as when oil is discovered, does their underlying importance become clear.

Oil revenues are marked by their exceptionally large size, unusual source, lack of stability, and secrecy. These four qualities reflect both the historic organization of the petroleum industry, and the revolutionary changes of the 1960s and 1970s that transformed the oil-producing world.


THE SCALE AND SOURCE OF OIL REVENUES

The petroleum industry generates a lot more government revenue than other kinds of industries. This makes the governments of oil-producing countries bigger than the governments of similar countries without oil.

Consider Nigeria, which became a major oil producer after the conclusion of the Biafra War in the late 1960s (see figure 2.1). From 1969 to 1977, the volume of oil that Nigeria produced grew by 380 percent, while the real price of oil almost quadrupled. The Nigerian government’s total revenues—from oil and all other sources—rose from $4.9 billion to $21.5 billion over these eight years, after accounting for inflation. At the same time, government spending rose from about 10 percent to more than 25 percent of the Nigerian economy. Not only did the

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The Oil Curse: How Petroleum Wealth Shapes the Development of Nations
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Illustrations ix
  • Tables xi
  • Preface xiii
  • Abbreviations xvii
  • Country Abbreviations xix
  • Chapter One - The Paradoxical Wealth of Nations 1
  • Chapter Two - The Trouble with Oil Revenues 27
  • Chapter Three - More Petroleum, Less Democracy 63
  • Chapter Four - Petroleum Perpetuates Patriarchy 111
  • Chapter Five - Oil-Based Violence 145
  • Chapter Six - Oil, Economic Growth, and Political Institutions 189
  • Chapter Seven - Good News and Bad News about Oil 223
  • References 255
  • Index 281
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