The Resource Curse Revisited

Susan Aaronson examines prospects for trade and accountable government in light of a new initiative to increase transparency around extractive resources. Might the Resource Curse be exorcised?

The promise of free trade to elevate living standards in poor countries has driven international development policy since WWII. Countries rich in oil, gas or minerals sell them to rich countries, and the money goes to desperately needed infrastructure, like safe drinking water. If only it had worked out that way. Instead, the concentration of wealth in oil rich states has often produced profoundly undemocratic nations, a phenomenon known as the Resource Curse.

But is this inevitable? Nearly 200 years after the theory of comparative advantage called for realigning economies around trade, the background institutions assumed to exist by the theory, such as basic transparency and reliable contracts, are -- perhaps -- starting to arrive.

Dr. Susan Aaronson (a Global Integrity Report: 2006 contributor) examines a new initiative to increase transparency in states dependent on extractive resources. Aaronson writes:

In 2003, the British government proposed a new strategy – the Extractive Industry Transparency Initiative (EITI), to address these problems. This initiative created a voluntary system to which governments rich with oil or minerals agree to adhere. These states entrust an independent administrator to compare extractive sales and revenues as declared by oil companies and recorded by governments. In addition, “all companies operating in the relevant sectors in countries implementing EITI have to disclose material payments to the government” and then make this information public. Such reporting reduces the ability of policymakers to demand bribes of companies, while increasing the ability of citizens to monitor government.

The analysis: Natural Resources, Often a Curse, Can Also Serve the Public

UPDATE: Susan has kindly provided Commons readers with the source data (with academic citations) for the article cited above.

Aaronson, "Is EITI the Future of CSR because it Aligns the Public and the Business Interest?"(MS Word, 300kb)

Aaronson and Winston, "Extractive Industry Indicators" (MS Powerpoint 1.5Mb)

Read More...

Summary only...

U.S. Congress steamrolls White House on earmarks

Here in the U.S. we've seen 7 years of radical expansion of executive branch power. The most frustrating aspect of this power-grab has been the near unanimous lack of opposition from Congress. With a few exceptions, the legislative branch has been unwilling to really push back against the Bush White House. Until today, when both parties rallied to defend their turf from Mr. Bush's meddling.

Congressional leaders of both parties, who are scheduled to meet on Tuesday with the president, said Mr. Bush would provoke a huge outcry on Capitol Hill if he ignored those earmarks. (New York Times)

On what crucial issue is the Congress so determined to prevail? Protecting Congress's ability to secretly channel money to pet projects.

At issue are earmarks, a non-transparent budget practice that allows members of Congress to send federal money to specific projects, without disclosing the member's connection to the project, or even the name of the person who included the earmark. Bush wants to ignore them unless they are written into the actual law. Congress rather likes their closed-door system. The only thing that keeps this from being scandal material is the fact that it happens all the time:

A new tally by the White House Office of Management and Budget shows that the 2008 spending bills signed by Mr. Bush include more than 11,700 earmarks, totaling $16.9 billion. (New York Times)

If only Mr. Bush's insistence on warrentless wiretapping, military tribunals, or the expansion of political appointments had met with such determined resistance.

Photo: D. B. King

Read More...

Summary only...