Book review: Poisoned Wells

I just finished reading Poisoned Wells: The Dirty Politics of African Oil, by Nicholas Shaxson. I was turned on to the book by Chris Blattman.

Overall, I recommend the book because it is interesting reading (although not so highly that you should throw down whatever you're reading now and rush to the nearest Barnes and Noble). There is a lot of interesting ground to cover with African oil, and the author's 15+ years of journalism on the subject have made him very, very deep. He has a lot of interesting details and anecdotes to supplement the overall historical narrative (which is not new).

He has some conspiracy theories, but they are generally plausible and not too outrageous. He's critical of oil companies, but not so blinded by hatred that he can't take a nuanced view, which I appreciated. On the other hand, I was often irritated by the feeling that he was cherry-picking facts and stories to tell his tale in a very journalistic and non-rigorous way.

At the end of his book, he commendably attempts to move beyond criticism to suggest three "radical surgeries" that would help "draw the poison.

1. "Cut our energy use, drastically and urgently." This one is hard to argue with in theory, but tougher to implement in practice. He suggests increasing fuel taxes and cutting other taxes to compensate. (Note: another revenue-neutral solution would be to tax-and-rebate; I really like the theoretical elegance of this solution, which is like turning the tragedy of the commons on its head.)
   
   
2. Crack down on tax havens for dirty money. This one is also nice in theory but hard in practice. Shaxson believes that "much of the problem could be eliminated with a few well-aimed legislative strokes", like criminalizing receipt of proceeds of illicit activity by U.S. banks, and forbidding banks from operating in jurisdictions which are beyond the law. I don't know enough to judge these measures on feasibility and effectiveness.
   
   
3. Distribute oil revenues directly to citizens. This final and most audacious suggestion is the one I'm most uncomfortable with. The idea has pedigree (it was proposed by a Columbia professor in an IMF working paper in 2003). I see how it could reduce corruption, by limiting the opportunities for distributional funny business by politicians. But it basically gives up on what should be the core goal of resource extraction - translating a country's physical, non-productive wealth (like oil or metals or gems) into economically productive capital (physical or human). Directly distributed oil revenues would likely be funneled largely into consumption, rather than investment; in addition to terrible inflation, this would fundamentally squander the opportunity to use resource wealth on public goods and capital formation. Yes, corruption makes this very hard, and attempts to mimic Norway's success with its resource wealth fund have mostly fallen short; but that alone is not a good enough reason to stop trying.
   

My favorite quote was near the end, and sums up what I think is his strongest argument throughout the book - that oil money exacerbates existing ethnic and political tensions, with often disastrous outcomes.

Finding oil is like dumping itching powder from helicopters, aggravating existing divisions.

He also brings to life the complexity of corruption, and how the black and white Western view is very difficult to reconcile with the African political and cultural context (and is often resented as a form of ideological colonialism).

If you're interested in a preview, check out this chapter on the recently deceased Omar Bongo, who ruled Gabon as president for 42 years (Chris Blattman also blogged this a few months ago). This short interview in Harper's also covers most of his main points in a concise way.