Oil wealth is a curse for poor countries

Oil can be a curse for poor countries, says the editor of Foreign Policy magazine Moyse Naim, in an article published by Financial Times.
Oil is a curse. Natural gas, copper and diamonds are also dangerous for the state of a country. Hence insight and one which is so powerful, and as counter-intuitive: the poor but resource-rich countries are not underdeveloped despite its hydrocarbon and mineral resources, namely because of them. In one way or another, oil – or gold, or zinc – make you poorer. This fact is hard to believe, but exceptions such as Norway and the United States are often used to argue that oil and universal prosperity can go hand in hand.

Rarity of such exceptions, however, not only confirms the rule, and shows what is necessary to avoid the consequences of natural resource-based wealth: democracy, transparency and effective public institutions that are accountable to citizens. These are important preconditions for the more technical aspects of the recipe, including the need to maintain macroeconomic stability, prudent management of public finances, investing part of their revenue abroad, creating a „fund of last resort, to diversify the economy and guarantees that the local currency will not reach too high values.

It sounds reasonable, and after Brazil, Ghana and other countries are soon to become major oil players can expect to witness the rare cases of those recommendations. Unfortunately, for most underdeveloped countries, the proposed protections are as utopian as the major targets for the achievement of which is offered to help. Countries that already have these institutional forces, there is no reason to worry about the curse of resource abundance. As with autoimmune diseases in other countries the problem itself prevent the creation of a decision. The concentration of power, corruption and governments’ ability to ignore the needs of the population, make the curse difficult to sustain. Yuan Pablo Perez Alfonso, oil minister of Venetsuale in the 60 years and a founding member of OPEC, was the first note of the problem. Oil, said he is not black and gold, these are the excrement of the devil. Since then, the insight of Alfonso Perez was verified by economists and policy experts. They documented that since 1975, the economies of underdeveloped, resource-rich countries are growing more slowly than countries that can not rely on exports of minerals and raw materials. Even when there is growth, boosted by exports of resources, it rarely leads to full social benefits of growth. Based on exports of resource economies have one thing in common. They all have exchange rates that encourage imports and prevent the export of almost everything except the main production. Not that their leaders do not understand the need for diversification, in fact, all oil exporters invested heavily in other sectors. Unfortunately, some of those investments failed, mainly because the exchange rate hinders the development of agriculture, manufacturing, tourism and other sectors. There is also a problem with the price of exported raw material itself. For the past 24 months, for example, oil rose from less than 80 dollars a barrel to 147 dollars, then fell to $ 30, then rose again to 60 dollars. These cycles of rise and fall have a significant effect. Boom leads to excessive investment, taking ill-considered risks and excessive indebtedness. In the subsequent decline leading to banking crises and draconian budget cuts that harm the poor, who are dependent on government programs. In addition, the petroleum growth does not lead to job creation in a volume commensurate with its effect on the economy. In many of these countries, oil and natural gas account for over 80% of government revenues. At the same time they are employed less than 10% of the workforce, increasing economic inequality. Perhaps more important is that the oil curse, fueling bad policy. Governments of these countries do not need to levy a tax on people to collect large tax revenues. As a result, their leaders can not afford not to be responsible to taxpayers, which in turn often have parasitic relation with the state. With the ability to have huge financial resources practice voluntarily, such governments inevitably corrupt. Once they came to power, these governments are difficult to download using the enormous public resources to buy or repressing political opponents. Statistically, petroleum authoritarian country is less likely to achieve democracy in resource-poor autocracy. The oil-rich governments in developing countries spend 2 to 10 times more for military spending in countries with low or medium incomes and are more likely to fight. Most countries, oil exporters, which have strong democratic institutions before they begin exporting, creating an environment inhospitable to democracy. This explains why various solutions used by resource-rich countries to avoid the effects of changes in commodity prices, fiscal surpluses, debt hindering the export exchange rates and other problems rarely work. The funds are used to them before they are needed or wasted in bad investments. I have lost all hope for poor countries rich in natural resources? Bne altogether. Chile and Botswana are two success stories in a continent where the wealth of the resource curse else had a devastating effect. How have managed to preserve, however, is still a mystery. Disclosure of the secret of their escape from the resource curse can save millions of excrement of the devil, but still nobody has achieved.

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