Duncan Green on resource curse

Oxfam’s Duncan Green reviews two new papers on natural resources and development, one by the World Bank and one by his own shop. He is harsh on the World Bank:

‘High oil and mineral prices mostly have a negative impact on long-run growth in exporting countries with bad governance. They have a significant positive impact on growth in exporters with good governance. This finding suggests that continued high commodity prices in the next few years could provide valuable resources to accelerate economic and social development in commodity exporting countries with good policies and governance.’

At this point alarm bells started to ring for me. Natural resources and governance are not independent variables – the interesting question is the impact of natural resources on governance itself. Countries are not born with either good or bad governance, they evolve, not least because of the influence of ‘money coming out of the ground’.

But that is nothing compared to this paper’s blind spot on environmental constraints. An entire paper on commodities, including agriculture, in which the only reference to climate is ‘investment climate’ is really quite an achievement... And nothing on natural resource exhaustion either... Other bits of the Bank are doing good work on climate change, but it doesn’t seem to have reached the authors.

His best point, responding to the Oxfam paper, is that the necessary domestic checks and balances and monitoring can become a much bigger tent than just the generic panacea of “civil society”:

At a national level, Lifting the Resource Curse argues, unsurprisingly, that the active involvement of civil society is essential both to increase the public pressure on governments to make the most of natural resource endowments and to act as watchdogs, tracking both the origins and uses of revenues from extractive exploitation. It is also of crucial importance to have public institutions that can support this process of participation and which are efficient in their control, monitoring, and enforcement of it.

But I think the paper could have gone a bit further with its power analysis on this – what other influential domestic groups have an interest in harnessing extractive industries for the national good? Answer, virtually all of them – business sectors (manufacturing, exporters, agriculture, finance), trade unions, media, national parliaments and local governments. Where and how have these kinds of coalitions formed and had an impact? There’s a lot more to life (and change) than CSOs.

This is particularly important for countries in which civil society, for whatever reason, struggles to punch at the same weight as powerful political and business interests.

P.S. Duncan is picky with his language, which is an excellent quality in a writer. Here’s him abolishing “human capital” and “political will”, respectively, from his vocabulary.