http://www.msnbc.com/news/899469.asp?cp1=1#BODY
This is an extract from a longer article, but is very thought provoking. It reverses the traditional assumption that oil has been a blessing for the people of the oil rich nations, and argues instead that it is oil that is responsible for the dictatorship and lack of political freedom that occurs in most of these.
Vice President Dick Cheney recently remarked that Iraq’s oil resources—the second largest in the world—will be a “significant advantage” when building democracy. This is a common refrain, echoed by many within and without the administration. Unfortunately, the opposite is closer to the truth. With the exception of Norway, virtually all the world’s oil states are dictatorships. This is not an accident. Oil—like other natural resources—does not help produce capitalism, civil society and thus democracy. It actually retards that process.
Countries with treasure in their soil don’t need to create the framework of laws and policies that produce economic growth and create a middle class. They simply drill into the ground for black gold. These “trust-fund states” don’t work for their wealth and thus don’t modernize—economically or politically. After all, easy money means a government doesn’t need to tax its people. That might sound like a good idea, but when a government takes money from its people, the people demand something in return. Like honesty, accountability, transparency—and eventually democracy.
This bargain, between taxation and representation, is at the heart of Western liberty. After all, that is why America broke away from Britain. It was being taxed but not represented in the British Parliament. The Saudi royal family offers its subjects a very different bargain: “We don’t ask much of you [in the form of taxes] and we don’t give you much [in the form of liberty].” It’s the inverse of the slogan that launched the American Revolution—no taxation without representation.
Far from limiting state power, oil actually strengthens it. There is always enough money for the army, the intelligence services and the secret police. Saudi Arabia, for example, spends 13 percent of its annual GDP on the military, four times America’s level. Oil also means that corruption infects every aspect of the society. Businessmen are valued not for what ideas they have or how hard they work, but for who they know. Oil states have a courtier culture, not a commercial culture.
No Iraqi will read this analysis and come to the conclusion that the country should seal up its oil wells and forswear its natural resources—nor should he. But it is worth asking how best to limit the damaging political and economic effects of oil wealth. It is not an impossible task. After all, some trust-fund kids turn out well.
The key is to take the wealth out of the arbitrary control of the state. This could mean privatizing the oil industry. But in Iraq, the oil is largely in the Shiite, Kurdish and Turkoman areas, which could trigger ethnic conflict (as happened in Nigeria). Privatization would also probably enrich a few well-connected Iraqis and create corrupt oligarchs, as happened in Russia. So it might also be worth looking at the structure of the few well-run state petroleum companies—Malaysia’s Petronas, for example—as models.
But perhaps the best approach is to create a national trust—with transparent and internationally monitored accounting—into which all oil revenues flow. These revenues could be spent only in specified ways: on, for example, health care and education. The World Bank has been experimenting on such a model with Chad, the tiny oil-rich African state. Alaska is another successful version of this model. Steven Clemons of the New America Foundation points out that Alaska distributes its oil revenues directly to its residents, bypassing the corruption usually created by leaving it in the hands of governments or oligarchs. This is a variation of land reform, redistributing wealth broadly, which was crucial in spurring democracy in Japan and almost all other feudal societies.