March 30, 2003

Back door nanny

Well, this makes two times today that I have found myself disagreeing with Glenn Reynolds on the relative worth of something he linked to. Hey, it can happen.

Anyway, I'm no economic expert by a long shot, but something strikes me as just plain wrong about the conclusions reached by conservaguy Ramesh Ponnuru (based on this article in the New Republic which I haven't read), and expanded upon by one T. Crown (that's the main site for the link from Instaman -- I know this will come as a stunning shock, but it's a Blogspot site and the archives don't work, so go to the post from March 28 right below the one from 3:13 pm). The premise here is that the discovery of large oil reserves is a Bad Thing for the countries that have them, and destroys their economy, government, and culture. The idea here is that people who are invested with a sudden bounty of revenue will stop being Thrifty and Decent and True, quit working hard, sell their souls to the Eville (American! of course) company that helps them exploit this revenue, and the governments of these poor, fragile baby nations will become corrupt, blah blah.

Of course, I am simplifying the points made,* and perhaps I am missing something -- but it seems to me that all these deep thinkers are missing something too: what other factors led to these supposedly strong, healthy nations (the example of Venezuela is used) to fall apart like cheap cheese the minute they found they had large oil reserves? According to Ponnuru, John Judis, in the New Republic article, states that

the presence of large amounts of oil gives the state too many resources.

Guh. That sentence just strikes me as wrong, bad, based on mistaken premises, and the ideas behind it are way too attractive to certain "fiscal conservatives" who are yet affected by nanny state penny-pinching urges. We show the officious bureaucratic grandma who wants to make everyone wear hand-me-downs out the front door, and here comes her equally penurious sister in through the back door. What I mean by this is: I hear the sounds of "isn't that too extravagant?" coming from certain quarters when it comes to letting the individual citizenry choose how hard they want to work, how much money they want to make, and so on.

What is really unattractive is that this Scroogefest seems to be focused on countries other than the US. For example: I don't know how strongly I can emphasize the fact that it isn't really feasable at this point to cut the Saudis off at the oil pipe. How can I be more blunt: they have nothing else worth selling, and their economy would collapse.

Two: we here in the U.S. have more resources than anybody, with the possible exception of oil (I don't know how much of that we have left, in relation to the Middle East's supply, yadda yadda). I don't hear any of these great minds complaining about the effect on the American economy and government of all our bounty of resources.

Anyway, I stress that I don't really understand the economic factors involved, but something really strikes me as wrong about the idea that a country can have "too many resources" without taking into account all sorts of other factors, like political cohesion, the influence of various strains of Marxism and other religious beliefs on the culture and political system of the countries in question, and so on.

*Update: bolds added for the benefit of those people who helpfully pointed out that I am "oversimplifying" -- something I already admitted to.

Posted by Andrea Harris at March 30, 2003 02:26 AM

I think that you are oversimplifying. The idea is that bountiful natural resources under state control tend to subsidize mischief and reduce accountability. Saudi Arabia or Iraq without oil could not afford to be as destructive as they are now. Hugo Chavez might not be in power had he not been able to promise a "fair" redistribution of his country's oil revenues. These examples are enough to suggest that Ponnuru is right, even though other countries are more successful at managing their natural resources.

Posted by: Jonathan Gewirtz at March 30, 2003 at 03:21 AM

The matter of oil wealth in State hands is much as Jonathan has put it. I would add this: There's an unfortunate correlation between the presence of oil and a locally low level of mental and moral development.

Now, the oil isn't to blame for that, of course. If we look closely at the early years of oil exploitation in the United States, we can see milder versions of the political thuggery that afflicts the oil satrapies of the Middle East. Moreover, any other extractive resource that had export value could take its place and cause the same sorts of problems.

When you combine an extractive resource of great value with a low regional morality -- i.e., a willingness to use force to get what you want -- the consequences seem to be foreordained.

Ultimately, all political problems are problems of morality and rationality. Morality, because government, as George Washington has told us, is not reason, nor eloquence, but force, and without limits on the acceptable uses of force, we are each of us at war with all. Rationality, because no system that proceeds against the evidence can come to anything but grief, and the coercive power of a modern State is unchecked by any force except the willingness to concede one's failures and think hard about them.

Morality and rationality are conspicuously absent from the Middle East. The region has resisted external attempts to introduce them.

Posted by: Francis W. Porretto at March 30, 2003 at 07:36 AM

Jonathan, I thought Andrea was pointing out that the person who wrote the original article was oversimplifying.

Anyway, just my fifty cents' worth (hey...I think my opinion is worth way more than 2 cents :-) )
The problem is not having "too many resources," it's having a windfall of wealth without having to work very hard for it and without having had a chance to develop social maturity. It's sort of like handing over $10,000 to an eight year old.

Posted by: Lynn S at March 30, 2003 at 08:29 AM

The big problem isn't just "too many resources," it's dependence of the economy on a resource that can be easily looted or monopolized by a tyrant. There are worse things than oil in this regard, for instance, huge reserves of gold or diamonds.

Posted by: Matt McIrvin at March 30, 2003 at 10:06 AM

Hey, thanks for pointing out that I was oversimplifying! When I already said I was. Okay, snark over, I haven't had my coffee yet.

You guys are missing my point: we have to stop treating people as helpless victims of circumstance. Oil and other large natural resources exist where they exist, and there is nothing we can do about that. As long as the people whose countries these large natural resources exist under let themselves be exploited, they will be. It seems to me that the article writers were bemoaning the existence of the natural resources themselves, and taking the "we need to not need them" route, which is unrealistic, to say the least. Also I caught a whiff of old-fashioned paternalism in their attitude towards the countries in question. I am sick of all the crying about the Victimized People™ -- no one is hiding the Guide to Life from anyone. If Venezuela, for instance, was such a civically strong nation pre-oil, why did its people fall for the redistributionist crap? Well, I know why -- but it's not the fault of the oil itself.

Posted by: Andrea Harris at March 30, 2003 at 11:32 AM

Sure it's the Venezuelans' fault. They did it to themselves. I'm just saying I agree with Ponnuru that they might have been better off without the oil.

I didn't notice paternalistic assumptions in Ponnuru's article, but if they were there and I missed them, I disagree with them.

Posted by: Jonathan Gewirtz at March 30, 2003 at 01:21 PM

Well, I don't agree that they might have been "better off" without oil. For one thing, it's like saying a country might be better off without riches. The virtue of being poor... no thanks, you can keep that. As my dad used to say, "I've been rich and I've been poor -- rich is better." I'd like to try "rich" for a while. I promise not to spend it all on booze and naked young men.

Posted by: Andrea Harris at March 30, 2003 at 01:35 PM

I'm inclined to agree with Ramesh in principle, but mainly because I saw a very similar phenomenon in no-direct-state-taxes Alaska. The disconnect between who puts people in office to run the state government, and who pays for state government, has really created a twisted situation up there.

Alaska's natural resources are owned collectively by everyone who lives in the state, thanks to the state's constitution. A stupider product of 1950s-era "enlightened" university thought would be hard for me to dig up.

Posted by: Kevin McGehee at March 30, 2003 at 01:58 PM

I should add that my view isn't based on "how much resources" the state has so much as the actual ownership of those resources. If the state owns the resources (or as in Alaska, "manages" the resources on behalf of the collective), that is in and of itself the problem.

I don't see a significant difference between a non-Ba'athist Iraq with state-owned oil and the present regime: Never grant to your friends power you wouldn't want to see wielded by your enemies.

Posted by: Kevin McGehee at March 30, 2003 at 03:17 PM

Actually, the problem isn't resources, Venezuela, for instance was exporting oil in the 1940s and German submarines were merrily blowing up the tankers. Venezuela was a comparatively rich country, exporting oil, grain and beef. The poor were mostly rural, living on semi-fuedal ranches. If nothing else, they ate well.
The problem is not resources, the problem is socialism. There is, short of diamond trees and gold bushes, no amount of any resource that can feed the insatiable appetite of socialism. Socialists believe that there's a money tree in every yard.

Posted by: Peter at March 30, 2003 at 07:53 PM

Socialism is difficult to sustain in the long run, but a natural-resources money spigot makes it possible to keep the delusion going that much longer. The same can be said for the Saudis' oil-supported Wahabist fantasies and Iraq's Baathist gangster-state. The inevitable collapses will be that much worse for having been postponed.

The choice isn't between rich and poor, because bad government eventually impoverishes even the wealthiest of societies. The choice is between facing reality now or later. Oil money provides an illusion of wealth to backward countries that lack the societal infrastructure to be productive otherwise. Oil, like foreign aid, discourages development of that infrastructure and delays a necessary reckoning.

Posted by: Jonathan Gewirtz at March 30, 2003 at 09:28 PM