Thursday, September 30, 2010

Find Oil, Get Poor

For some time I wondered why rich countries that find oil get richer, but poor countries that find oil get poorer. There is not a single example of an African nation that found oil and by doing so improved economic conditions for its people. In all cases, in the African continent, income and wealth from oil ended up in the pockets of the multinational exploring companies (MobilExxon and the like), arms dealers and manufacturers, and a handful of corrupt politicians, but never in the pocket of the people. Often the issue is also meddled with by intrusions from the IMF and the World Bank. The involvement of these two organizations in these poor countries having discovered oil does not improve these nations' fate of getting poorer. It is not limited to oil, other resources will do as well, and it is not limited to poor nations in Africa, poor nations in other continents are likely to follow the same path. There are some exceptions, most notably Bolivia and Venezuela.

Today I started reading up on this known issue and I learned that there is even a term for this behavior. It is called "the Curse of Oil" or the oil curse for short. The general term is Resource Curse. The 16-page report by Samuel R. Schubert published in the scientific journal Oil and Gas Business in 2006 entitled "Revisiting The Oil Curse: Are Oil Rich Nations Really Doomed To Autocracy And Inequality?" describes the situation and the facts in an excellent fashion. Read it, it is fascinating.

When Western politicians, organizations, corporations (Bush, Obama, Blair, IMF, World Bank, etc.) say and dictate that poor countries must do what is right for the people, they really mean the western corporations. And they (with help from their credits) have the power to modify policies to see through that the benefits of oil finds in poor countries flow back into the rich nations. An article entitled "When Two Poor Countries Reclaimed Oilfields, Why Did Just One Spark Uproar?" in the Guardian written by George Monbiot also talks about this topic.

Also relevant and compelling is the TED video entitled "Four Ways To Help The Bottom Billion" that suggests that the rich nations should help install good governance in poor countries to avoid the resource curse.

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