With money at their disposal, many African governments spent more on poverty reduction, education and health care, which in turn opened up new economic prospects for the people. Heilbrunn does not deny that the oil boom had negative impacts, including Dutch disease, corruption and resource-motivated armed conflict, on some countries. Overall, however, he concludes that oil production is a dynamic and open process that can steer a country in different directions.

Change takes time

Overall, it is clear that closed theories like Karl′s take too little account of the historical dimension, especially the long-term nature of development. Country comparisons, such as the one carried out by Sachs and Warner, use highly aggregated variables, so it is difficult to form a sufficiently clear picture of institutional factors and the various policy measures taken by the respective ruling elites.

Poverty on the outskirts of Algiers (photo: Bouadam Ratiba)
Poverty despite a resource-rich economy: Algeria – leading oil producer and Europe′s second largest gas supplier after Russia – has been swamped with petrodollars since the onset of the fourth oil crisis in 2003. Yet the discrepancy is alarming: while the state lines its pockets, the Algerian population becomes increasingly impoverished

Above all, it is important to take a close look at the countries compared. Given the different history, it is not surprising that industrial countries have better governance indicators than resource exporting ones. Such comparisons do little to explain the impacts of oil. As Peters (2014) points out, many of the negative features noted in oil states – authoritarian rule, patronage networks, corruption and fiscal crises – also apply to countries that do not have oil. The ″resource curse″ approach does not explain the matter, which requires closer reflection.

Against this backdrop, Heilbrunn′s focus on the historical background of the oil-producing states is quite convincing. The historical perspective leads to the conclusion that processes of social change take place subtly and take time. And that is also confirmed by the long-term study conducted by Cavalcanti, Da Mata and Toscani.

There thus seems to be no automatic determinant of the failure or success of resource-rich countries. On the contrary, they result from an open-ended dynamic process that depends on a number of largely historical, country-specific factors.

Nassir Djafari

© D&C | Development and Cooperation 2016

Nassir Djafari is a former KfW economist and a freelance writer.

Bibliography:

Sachs, J., Warner, A., 1997: "Natural resource abundance and economic growth", Cambridge

Karl, T. L., 1997: "The paradox of plenty – oil booms and petro-states", London

Eifert, B., Gelb, A., Tallroth, N. B., 2002: "The political economy of fiscal policy and economic management in oil exporting countries", World Bank

Isham, J., Woolcock, M., Pritchett, L., Busby, G., 2005: "The varieties of resource experience: Natural resource export structures and political economy of economic growth", World Bank

Auty, R., 2012: "Oil and development in the Middle East"

Heilbrunn, J. R., 2014: "Oil, Democracy and Development in Africa", Cambridge

Peters, S., 2014: "Erdol, Rente und Politik – Vom Ressourcenfluch zur Rentengesellschaft"

More on this topic