IN 2014, Pakistan faces continued militancy and violence from the various factions of the Tehreek-i-Taliban, a moribund economy characterised by low growth and high inflation, persistent power cuts, an intractable ethno-national uprising in Balochistan, widespread corruption, and rising intolerance. Nonetheless, if the arguments advanced by Michael Ross in The Oil Curse are to be believed, Pakistan should count itself lucky that it does not have any oil.

Over the course of seven chapters and almost 300 pages, Ross comprehensively lays out how mineral wealth, in the form of oil and natural gas, has been responsible for a wide variety of economic and political ailments in the oil-producing nations, ranging from the persistence of authoritarian forms of government to the maintenance of patriarchal social structures. Backing up his analysis with empirical data, statistical analysis, and qualitative case studies, Ross makes a valuable contribution to the debate on the ‘resource curse’ and its implications for development and democratisation around the world.

One influential strand of thinking on the effects of oil on economic growth, epitomised by the work of Jeffrey Sachs and Andrew Warner, suggests that rather than promoting economic growth, oil has often been detrimental to the development of oil-producing states. Evidence for this argument is often drawn from the experience of the 1980s and 1990s, when many oil-rich nations experienced dismal levels of economic growth. Ross challenges this approach to understanding the problem, and does so by taking a broader view of the time period in which oil revenues have intersected with government policy. Using data from the 1970s onwards across a wide variety of national contexts, Ross demonstrates how, rather than suffering from low growth, oil-producing countries have instead suffered at the hands of considerable economic volatility linked to the fluctuation of global oil prices over the course of the last 40 years. On average, therefore, oil-producing states have actually exhibited growth rates that are no higher or lower than those of other non-oil producing nations.

This finding, however, produces another question that animates much of the discussion in the book. While the growth rates of oil-producing nations are roughly equivalent to those of other states, Ross argues that they should have actually been higher than they were given the tremendous revenues generated from the development and export of oil. In seeking to understand why most oil-producing nations failed to take advantage of their wealth, The Oil Curse advances a number of inter-related arguments. For starters, Ross suggests that the oil curse is a relatively new phenomenon, emerging in the 1970s after the wave of nationalisation that saw many oil-producing states wrest control of their mineral wealth from the large multinational corporations that had hitherto dominated the global oil trade. Prior to this point, oil companies that siphoned wealth away from the countries where oil was extracted inadvertently insulated the governments of those areas from the corrosive effects of their mineral wealth.

This point is crucial because it has a direct bearing on our distinct mechanisms through which oil wealth impedes development and growth. First of all is the association of oil with what is known as the ‘Dutch Disease,’ namely the state of affairs in which the export of a valuable natural resource leads to a decline in the manufacturing and agricultural sectors of an economy. This runs contrary to the notion that the wealth from oil could be reinvested to help develop other sectors of the economy. The reason why this happens is very simple; the sale of a lucrative national resource like oil helps to ensure that the value of the currency of the oil-producing state remains high. This, in turn, makes exports less competitive while simultaneously making it more cost-effective to simply import manufactured goods. Additionally, a boom in the production of a natural resource like oil leads to increasing amounts of capital and labour being invested in that sector, depriving other sectors of the economy of these resources. For Ross, oil leads to very severe cases of the Dutch Disease, impeding the diversification of oil-dependent economies, and leaving them extremely vulnerable to fluctuations in global prices and demand for oil. Paradoxically, the more reliant a state is on oil revenue, the less likely it is to develop the kinds of economic institutions that could lead to more well-rounded growth and development.

The second major mechanism Ross identifies is the way in which oil wealth constrains democratisation. Here, the book is partially sympathetic to arguments about rentier states that point towards how mineral wealth reduces the need for taxation which, in turn, creates a state-citizen disconnect. Citizens who are taxed usually expect to see their money being spent on effective governance, with this creating a virtuous cycle of accountability, participation, and democracy. Since states that are dependent on oil have little need for tax revenues to fund their spending, there are few mechanisms through which they can be held accountable by their citizens. At the same time, the presence of revenues from oil allows these states to dispense patronage, co-opting social groups that can provide them with support, and investing in the types of infrastructural development that could prevent the emergence of opposition movements. However, Ross adds nuance to this argument by highlighting the importance of transparency, or a lack of it thereof, in impeding demands for greater democracy. Basically, since citizens should ideally be concerned about the link between government spending and total revenues, rather than just tax revenues, one of the ways in which authoritarian governments have been able to forestall demands for greater public spending and popular participation in the decision-making process is by exploiting the opaque nature of oil contracts and trading to hide the level of wealth being accumulated by the state. This has the effect of reducing citizen expectations to more easily manageable levels while simultaneously facilitating the patronage politics and populist spending that underpin authoritarian government. Where oil-rich states have been forced to become more transparent, popular unrest has usually ensued.

Having identified the effects of oil on economic development and democratisation, the book turns to patriarchy and the way in which oil wealth has had a negative impact on female empowerment. The argument advanced here is twofold. Firstly, following from his analysis of the Dutch Disease, Ross demonstrates how a lack of industrial development in many oil-rich states, particularly in North Africa and the Middle East, has prevented the expansion of female participation in the industrial workforce. Given that increased female involvement in the economy has long been associated with greater empowerment throughout the world, the absence of such social change in many oil-producing nations has reinforced traditional gender roles in society. Secondly, Ross draws a statistical link between the low levels of female employment, high levels of fertility and, consequently, rapid population growth in many oil-producing countries. This has the additional effect of compounding the economic problems faced by these states, as high population growth rates have resulted in lower per capita incomes.

Finally, Ross also devotes a chapter to discussing the link between oil wealth and conflict, pointing towards the correlation between the prevalence of civil wars and the production of oil in developing countries around the world. Here, much of the argument focuses on the causal mechanisms at work, and Ross persuasively shows how conflict is often triggered in countries where low per capita incomes combine with the presence of considerable oil wealth to generate contestation over the distribution of a state’s resources. Conversely, where incomes are higher and wealth is more equitably distributed, conflict is less likely to occur despite the presence of oil.

Bringing all of this together in a discussion on institutions at the end of the book, Ross attempts to outline the inter-linkages between low economic development, authoritarianism, patriarchy, and civil war while also attempting to account for the varying experiences of different oil-producing states. For example, while both Norway and Angola produce oil, they have fundamentally different systems of governance and levels of economic development. Drawing on the fact that the different countries in question have had widely varying historical experiences, Ross turns the argument on its head by suggesting that rather than distorting institutional development after being exploited by the state, the effect of oil wealth is largely determined by institutional configuration prior to its use as a source of revenue. Put simply, states that were at lower levels of institutional development and capacity when oil was first discovered and used were less able to make use of it in ways that would be conducive to more long-term and well-rounded development. Similarly, states that became increasingly dependent on oil, perhaps as a consequence of their failure to manage it more effectively, would be more likely to remain trapped in the oil curse than those that were less dependent on it. Nonetheless, the book ends on an optimistic note, suggesting that if oil-dependent nations were to embrace greater levels of transparency and devote more energy to the effective management and use of oil revenues, they might still be able to escape the effects of the oil curse.

Given the wealth of data and case studies used to support its arguments, it is difficult to find much fault with the analysis presented in The Oil Curse. However, there are a few areas in which the book could have potentially provided more clarity and insight. For example, even though some time is spent referring to the oil-producing nations of Latin America (and, to a lesser extent, Europe and North America), the emphasis of the book remains on North Africa and the Middle East. This is problematic at times because the very different experiences of the Latin American oil-producing nations are presented as exceptions to the arguments being made without any truly detailed analysis of the mechanisms through which they ended up pursuing such different paths. Similarly, the book could also be faulted for a lack of attention to specific national histories; while the penultimate chapter on institutions provides some insights into the sources of variation between different oil-producing nations, significant historical factors like the impact of colonialism on long-term institutional development remain absent from the narrative. However, to be fair to Michael Ross, addressing this kind of issue would require a different kind of book, one that focused more on teasing out the specificities of a smaller number of cases through a more detailed comparative historical analysis.

Recently in Carbon Democracy, Timothy Mitchell presents a different argument about oil and its relationship to democracy and development. As Mitchell points out, coal miners in England and other parts of the advanced industrialised world were crucial to the process of democratisation because they, as well as other workers involved in the transport of coal, possessed the capacity to disrupt the flows of energy that were crucial to the newly industrialising economies of Europe and the United States. Through strikes and other forms of collective action, they were able to wrest concessions from states that had hitherto been dominated by privileged elites clinging on to their monopoly over economic and political power.

However, the transition from coal to oil in the first half of the 20th century had a profound impact on this process. Firstly, since the world’s largest oil reserves were generally located in parts of the world that had not yet industrialised or developed, the shift to external sources of energy greatly reduced the power of the mining and transport unions in the industrialised world. Secondly, and perhaps more importantly, the West was able to make use of its superior economic and military clout to erect and support the types of coercive and extractive state structures in the Middle East and elsewhere that could be relied upon to provide a constant supply of oil without the kind of disruption associated with democratisation. These were the states that were inherited by many of the former colonies and for Mitchell, it is this legacy, and the West’s continued support for authoritarianism in exchange for oil that serves to explain the persistent underdevelopment of many oil-producing nations.

The insights from Mitchell’s analysis do not contradict those that are to be found in The Oil Curse. Indeed, they supplement them, providing the kind of historical context and sensitivity to international energy politics that could help to strengthen the arguments presented by Michael Ross. Ultimately, however, despite these relatively minor sins of omission, The Oil Curse represents an extremely comprehensive contribution to the scholarship on the political economy of mineral wealth. It is strongly recommended for those who wish to learn more about the economics of oil, democratisation, development, and the contemporary politics of the Middle East and North Africa.

The reviewer is Assistant Professor of Political Science at LUMS.

The Oil Curse: How Petroleum Wealth Shapes the Development of Nations

(DEVELOPMENT)

By Michael L. Ross

Princeton University Press, US

ISBN 978-0-91-14545-7

289pp.