FinancialTimes: All the world's troubles in one word - oil

"The crucial nature of [Putin vs. Yukos] emerges in a forthcoming article by Nancy Birdsall and Arvind Subramanian in Foreign Affairs, the American periodical. The authors - Ms Birdsall heads the Washington-based Center for Global Development, Mr Subramanian is at the International Monetary Fund - offer a one-word explanation for the globe's diverse troubles: oil. An oil windfall may benefit a country with a developed legal culture - Britain, Norway and the state of Alaska. But in places where civic accountability, the rule of law and democratic process are not firm, windfall means wipe-out. The very presence of oil turns law-abiders into thugs, and pushes nations backwards into chaos, religious fundamentalism and despair.
The million Africans who died in the Biafran struggle in the late 1960s were the most tragic casualties of this dynamic. Their story was not merely about starvation or tribal conflict (as the press wrote at the time) but also the attempt by Nigeria's eastern Igbo people to control oil reserves.
The oil curse argument is not traditional development economics, which views such natural resources as blessings to developing countries - representing the equivalent of money in the bank, available for, say, infrastructure spending. Still, suddenly we are hearing about it - not only from Foreign Affairs, but in books and periodicals across the political spectrum. Its provenance is therefore worth review.
Economists on the left long ago began noting that imperial or colonial control of natural resources - the oil of the Middle East, the poppy fields in central Asia, the sugar cane in British Guyana, the tobacco in the American south - enabled them to oppress the locals. This view was the intellectual forerunner of the cartoon-like notion that the US wants to rule the world through Halliburton petro-dollars.
The market-oriented right tends to bridle at the idea that any capital, even petro-capital, is evil. Still in the last century free-market thinkers from Mancur Olson to Peter Bauer began to point out that postcolonial experience suggested that the natural resources, and not the colonisers, were the problem. Indeed, the absence of natural resources constituted an advantage. Japan, West Germany, Singapore all profited when they were forced to develop industrial or intellectual capital.
What Ms Birdsall and Mr Subramanian add to this is their work on the problem of civic institutions. They note that oil wealth relieves the state of pressure to tax (Saudi Arabia). The state therefore has no stake in private-sector creation of wealth or in citizens' day-to-day well-being. There is no need for a civic relationship - on either side. Property rights, contract law, reliable courts - to us, basics - seem dispensable. The state is free to bully. Or to steal."