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

By Michael L. Ross | Go to book overview

CHAPTER SIX
Oil, Economic Growth, and Political Institutions

Hectic prosperity is followed all too swiftly by complete
collapse.

—Paul Frankel, “Essentials of Petroleum, 1946”

IN THE 1950s and 1960s, most social scientists believed that natural resource wealth was good for economic growth: the mineral-rich states of Africa seemed to have a promising future but the mineral-poor states of East Asia would probably face great hardships. Yet by the mid-1990s, the opposite seemed to be true: the resource-poor states of East Asia had enjoyed decades of strong growth, while most of Africa’s resource-rich states were development failures. The oil-rich Middle Eastern states— which until the mid-1970s, had enjoyed spectacular growth—spent most of the 1980s and early 1990s losing ground. By 2005, at least half of the OPEC countries were poorer than they had been thirty years earlier. Economists began to argue that natural resource wealth in general, and oil wealth in particular, could paradoxically reduce economic growth in the developing world by triggering “corruption, weak governance, rent-seeking, [and] plunder.”1

Much of this conventional wisdom is mistaken: oil does not typically lead to slower economic growth, bureaucratic ineffectiveness, unusually high levels of corruption, or unusually low levels of human development. Economic growth in the oil states has been erratic, but neither faster nor slower than economic growth in other states. The real mystery is why the oil states have had normal growth rates, when they should have had faster than normal economic growth, given their enormous natural wealth.


DID THE OIL STATES HAVE SLOW ECONOMIC GROWTH?

Many influential studies contend that oil wealth is an economic curse: the more oil that countries extract, the slower their economic growth.2

1 Sala-i-Martin and Subramanian 2003, 4.

2 The seminal paper on this topic was by economists Jeffrey Sachs and Andrew Warner (1995). Building on earlier work by Alan Gelb and his colleagues (1988) and Richard Auty

-189-

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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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