August 13, 2002

12:33 PM

"The myth of oil prosperity runs wide and deep". "Petroleum-led development strategies have delivered nation after nation into a spiral of debt and dependency. And yet, governments, corporations, and international financial institutions continue to reinvest in the growing, global oil economy". Consider Nigeria, the point of focus of attention of environmentalists, human rights activists and fair trade advocates around the world. With its annual debt service obligation at over $4 bn, more than a third of its export income, Nigeria has in recent years pegged its annual budget allocation for actual debt servicing at $2 bn. Lower export earnings forced it to cut this to $1.5 bn in the 1999 budget. Who's to blame? Theftocracies, the IMF, World Bank, oil companies, foreign governments? Since it is clear that debt restructuring harms more than helps, will there be more debt relief, and finally, who ends up paying the banks when loans are written off?
posted by Mack Twain (6 comments total)

nigeria? they've got all those tens of millions frozen under various political circumstances, and if more americans would volunteer their bank account numbers to help them out, well, nigeria's economy will go right in the gutter!
posted by quonsar at 12:47 PM on August 13, 2002

A few years ago The Economist ran a graph showing GDP growth on one axis and fraction of income produced by mining, drilling etc (as opposed to industry) on the other. About 30 countries had been represented in the graph as dots.

It showed a clear trend: the more your economy was dependent on digging things out of the earth, the worse your economy did over the long term.
posted by Triplanetary at 12:48 PM on August 13, 2002

Indonesia is another country where oil has corrupted as much as enriched.
posted by gimonca at 12:51 PM on August 13, 2002

Sounds like a form of modern-day mercantilism to me. The environmentalists are against it for different reasons, but they bring up good points.
posted by insomnyuk at 12:59 PM on August 13, 2002

Glad to see this research being publicized. Even if we started making plans to stop using oil entirely today, it'd take yeears to ween our mega industries.
posted by zekinskia at 1:04 PM on August 13, 2002

James Surowiecki also had a good piece of analysis on "The Real Price of Oil" in the New Yorker last year:

Why does the resource curse exist? The simplest answer is that being dependent on natural resources makes a country less likely to invest in other things that might be economically valuable, especially manufacturing. In part, this is a question of prices. When a country like Saudi Arabia is flush with natural-resource money, everything in that country becomes more expensive, including labor. It's difficult to open, say, a factory to make khakis for the Gap, because the khakis would be too expensive to compete with those made elsewhere. This hurts, because manufacturing, with its competitive pressures and its demand for technological innovation, is a key source of economic growth for developing countries.

posted by mattpfeff at 5:17 PM on August 13, 2002