Oil and Trouble: Corruption and the End of the “Resource Curse”

I‘ve been interested in the phenomenon of the “resource curse” (both its political and economic effects) for a long time, but I wrote this essay as part of a political economy course I took in fall 2019. Along with other scholars, this essay borrows from the work of political economist Amartya Sen, author of “Development as Freedom” (a really influential book on international political economy that I’d highly recommend). WordPress would not let me include the footnotes I’d written for the original paper, but if you message me over “Contact” I’d be happy to provide my sources. As always, feel free to reach out with comments or questions.

The notion of the “resource curse,” which has counterintuitively impeded economic development in resource-rich countries, has baffled economists and political scientists for decades.  Resource-dependent countries, rather than expanding their economies and improving the standard of living of their citizens, often remain beholden to a host of economic and political troubles.  Nigeria, discussed extensively in William Easterly’s The Elusive Quest for Growth, provides a perfect example.  In spite of its vast oil wealth, the Nigerian government cannot provide basic services for its citizens; Nigerians in Lagos live in crowded slums perched on top of stilts to prevent them from falling into the polluted waters of the lagoons below.  Rather than using the country’s oil wealth to help its struggling citizens, the Nigerian government has chosen to skim funds off the top and spend the rest on an “$8 billion steel complex that has yet to produce a bar of steel and a new national capital built from scratch” (Easterly 232). 

By experiencing both poverty and political exclusion — two key conditions for development according to scholar Amartya Sen — resource-rich states remain in a permanent state of underdevelopment. How can such underdeveloped conditions persist in states with such potential for wealth? This essay will analyze a central political mechanism behind the resource curse — corruption — and discuss actions that policymakers, citizens, and states can take to ensure that resource wealth confers a development advantage rather than a hindrance.

Numerous scholars have linked resource wealth — oil in particular — to political violence (Bates 2008).  Even disregarding oil and focusing on other resources, it is clear that numerous resource-rich states across the Global South remain mired in poverty in spite of their potential for growth.  With this in mind, how should resource-heavy developing countries promote genuine development? While some scholars have proffered democratization as the key to curtailing the spread of political violence in resource-rich states, research shows that democracy is not a guaranteed cure.  Bates (2008) has linked intermediate democracy (the center of the “horseshoe” between democracy and autocracy) with increased levels of state failure in Africa, the region most associated with the resource curse outside the Middle East. Counterintuitively, countries in the midst of democratization may find themselves more prone to resource-fueled political conflict than autocracies.  Hence, one solution to the resource curse is to stabilize and hasten the democratization process, minimizing the amount of time resource-rich countries spend in the “liminal zone” between democracy and autocracy. Stable democratization, as Amartya Sen might argue, could allow countries to shirk the resource curse and embrace the notion of “development as freedom.”

Even more crucial to breaking the “curse” than the introduction of democracy, however, is ending corruption in developing countries.  The resource curse has proliferated largely because rent-seeking governments allow it to. Governments capable of controlling access to resources (oil, a nationalized and thus government-managed industry in many countries, again comes to mind) can “skim” resource wealth off the top, as Easterly’s Nigeria example so aptly demonstrates.  This allows corrupt politicians to supplement not only their personal wealth, but also that of their militaries. This, in turn, can help entrench brutal regimes and keep the population from advocating for itself (Saddam’s oil-funded regime, aggressive both within Iraq and internationally, furnishes a pertinent example).

Oil-rich states often find themselves at higher risk of autocracy

Clearly, corruption combined with resource wealth furnishes a host of political and economic ills.  With this in mind, how can citizens and policymakers work to reduce political corruption in resource-rich countries?  In Poor Economics, Banerjee writes that, while many economists believe corrupt states to be economic lost causes, citizens can do a great deal to counter corruption in small ways and work towards creating a culture of openness.  He argues that once corrupt officials know they are being monitored, they become much less likely to steal funds. One social experiment, for example, found that Ugandan schools only received 13 percent of the funding they had been granted due to officials’ pilfering along the supply chain.  Once the researchers who had carried out this experiment published their results, the schools began receiving 80 percent of their allocated funding (430). Naturally, this is not to say that local anti-corruption interventions will solve all elements of the resource curse; deeply-entrenched state corruption would likely prove much more difficult to prevent than localized corruption.  Even so, Banerjee’s example demonstrates that local interventions can do a great deal to “root out” the corruption that has allowed the resource curse to proliferate. As Sachs might argue, donor countries can assist developing countries in this effort by providing aid to states with an established track record of anti-corruption policies.

Outwardly, it would seem as though the world has moved past the colonial era; states have embraced self-determination and independent governance, and strong norms against colonial rule have proliferated after the Second World War.  Even so, resource-rich countries in the Global South remain mired in poverty. Formerly stalked by colonial powers for their natural resources, these states continue to suffer under a new type of resource curse — this one brought on largely by corruption.  Only by rooting out this corruption — an effort with which donor countries can assist developing countries — can resource-rich economies embrace full development and shirk the curse once and for all.