In
class we discussed the resource curse, the role oil companies play in it, and
what the role of other countries to help fix the problem. From my
understanding, the resource curse occurs when, in an under developed country,
one resource is abundantly available and the main source of money for that
country. This can lead to many issues for development, government and conflict.
Oil
is often the natural resource associated with the resource curse. Oil is exported
out, and those countries importing then have refineries in order to make the
oil usable. These countries place a high demand on these cities to get the oil
since it is used in such high quantities, which is likely a contributing factor
to the resource curse. Possibly to alleviate some of this pressure, oil
importing countries could import from multiple countries instead of only a few.
Even though if all the importers spread it out, the exports would end up to be
the same, a schedule could be implemented so that the exporters do not have to
export such high quantities so often. Another possibility for alleviation could
be a cap on exports or a cap on income taken in on the export of one resource.
This would incentivize diversification of exports so that these countries are
not so heavily reliant on just the one resource. Diversification would push the
exporting countries to produce more crops or other resources that could be use
as exports and thus alleviate stress on producing such great quantities of just
one resource. This would also help with avoiding depletion of the resource. Oil
companies are thought to perpetuate the resource curse cycle, and this could be
fixed by having the oil producing countries refine their own oil. This would
add jobs to the country in the refineries. Also, the control over the oil would
be spread out so much further, and not just in the hands of a few. It would
lessen the chance of the military controlling the resource, since many more
people would need to be involved in order to refine before it could be exported.
Other
countries could play a role in fixing the curse. For oil in particular, the big
importers of oil could decrease their demand. This is obviously much easier
said than done. This would involve developing a different fuel source to be
used on a large scale, and thus far I don’t think we have an option for that.
Countries could ban booty futures so that it would be illegal for rights to be
bought for an oil well in case of a future war. Maybe the importers, who are
typically wealthier countries, could offer some kind of incentive to have these
countries work towards better governments and enforcement practices. Also, like
the suggestion earlier of the exporting countries being the ones who refine the
oil, the wealthier importing countries could offer money, or offer a loan to
the exporters to develop and construct a refinery in order to help their
government and economy run a bit more smoothly.
I think your point about having in-country refineries is very interesting, but I do not think that this would necessary solve the problem that you are trying to. The government or military could still control the refinery and the public would have little to no recourse to criticize them. Dutch disease, as it is often called, is the main element holding these countries back but without some sort of civil society action (such as the Arab Spring), their economies will not be forced to develop. I once did a project on Libya and one of the most important policy recommendations I had was to create some fair system of taxation in this oil-rich country so that the government would at least be held accountable. I believe that oil funds should be placed aside and used for something like emergency situations rather than potentially used for public services. Tax money should be used for public services, rather than rent from oil wealth, because it creates accountability in the system. As sad as it sounds, how can a public really ask for the government to provide for them (services) without paying something in return (taxes) and have a food to stand on. Yes, rent-heavy governments should provide public services to their people, but as devil's advocate, what obligation do they really have outside of human rights considerations?
ReplyDeleteCOMMENT FROM ABBY DICKES
ReplyDeleteI think that you bring up a lot of interesting suggestions. I like your idea about importing oil in smaller quantities but more often. While I am no economic guru, I feel as though that can create a more stable market by having a constant flow of exports, imports, and cash. Pressure rises when a large purchase is needed and this can loosen the tension on those exporting the oil, who then have to resort to the resource curse to ensure that they are able to export enough oil under their name. I also like the idea of exporting countries refining their own oil- I think that it will create a new industry in often developing countries and again, allow for a more stable market. Importers, such as America, could use the resources once used for refining oil for new technological developments to decrease the use of oil.
I agree with Katie about Dutch Disease; it's really important to make sure that there is a fair system of taxation and a focus on growth in other sectors of the economy. I'm not sure that spreading imports is going to solve the resource curse; while it might make the market slightly more fair, I think what is really important is to begin focusing on R&D in the renewable sector and to begin preparing for a future where oil is not so abundant.
ReplyDeleteKatie - I thought that maybe with in-country refineries, the government would become more dependent on its citizens, since the citizens could be the workers in the refineries, and that could start the creation of a balance within the country. But clearly this is very optimistic, and not a reality. You're right that it is very important for the government to be held more accountable. The system you've described, with oil funds saved for emergencies, and taxes paying for public services, sounds like a good way to create balance within the countries.
ReplyDeleteProf. Shirk - Agreed. I think that high pressures in unstable countries is what leads to the shady tactics that keep the resource curse going. Alleviating some of the pressure might help them to reach some kind of stability.
Ella - Definitely. I don't think that spreading it out would solve the problem, but could play a part in ultimately finding a solution. Research and development is absolutely really important, but how realistic is that, especially within developing countries with little funds. The developing countries wouldn't really be able to do all the much to prepare for that.