Financial Transparency Coalition

In college we studied the so-called “resource curse:” the tragic observation that countries well-endowed with natural resources tend to have slower economic growth and poorer development than those without. I remember, very clearly, that we studied this concept as though it were a truism—a common and (mostly) irreversible reality that just was. This theory has, in fact, been demonstrated very strongly in quantitative terms. According to an analysis of developing countries by Jeffrey Sachs and Andrew Warner, the more an economy relies on mineral wealth, the lower its growth rate.

Of course, in my classes, we also studied the drivers behind this phenomenon. In economics, we learned about the decline in the competitiveness of other sectors precipitated by resource endowments and volatility of revenues caused by natural market fluctuations in the prices of these goods. In political science, our professors taught us about other causes, like government mismanagement and weak, ineffectual institutions.

These professors also briefly discussed the consequences of the resource curse. As we see in countries like Angola and Sierra Leona, endowments in natural resources like oil and diamonds can lead to decades of conflict as different groups fight for their share. In other countries—Libya is an example—a leader (or, at times, leaders) uses profits from the resource to govern and so do not need to be held accountable to the population through taxation. Other countries fall victim to excessive borrowing internationally, corruption, revenue volatility, and a tug-of-war between the people and the government. The list goes on.

Rarely, though, in all these studies did we talk about solutions. Perhaps that was particular to my University. But I think not. In fact, you rarely hear policy makers, aid organizations, and even international development organizations talking about solutions to the resource curse (there are some exceptions to this rule, though, which I will discuss in more detail later).

I see two reasons for this. First, the problem is ubiquitous, entrenched, and (seemingly) an issue of national jurisdiction. So for those outside these countries, it is easy to think of it as “their” problem. These resources are valuable—very valuable—so we aren’t going to convince Angola to stop drilling for oil or Sierra Leone to stop mining for diamonds any sooner than we are going to convince Americans and Europeans to stop buying cars and engagement rings. Second, there’s no obvious solution for outsiders. It isn’t like starvation or disease. You can’t curtail it with money or food or education for women. It’s difficult to turn the problem into a 30 second ad, and you’re definitely not going to put it on a poster.¹

Above, I said the resource curse is “seemingly” an issue of national jurisdiction. That deserves some explanation. Governance itself is an issue of national jurisdiction, but the extractive industry that drives the supply of these resources is not. Most of these companies are, in fact, American and European and—therefore—are accountable to the governments of America and Europe. It is these companies, with their corrupt practices and lack of accountability, that facilitate the embezzlement and revenue misappropriation, which directly contribute to the resource curse.

This, at its core, is the reason I believe this problem does have a solution achievable by outsiders. And it raises yet another exception to my discussion above. I said most organizations don’t talk about solutions to the resource curse. But organizations like Publish What You Pay (PWYP) and Global Witness (and others) have provided clear, passionate voices, campaigning for accountability and stronger financial transparency rules for exactly this reason. Their efforts are directly responsible for the international community’s changing tone on this issue.

It is to this end that PWYP launched a twitter campaign asking what you (yes, you) would do with oil money if you had it. The answers have ranged from spending on education, health care, the environment, infrastructure, and community development to rugby teams, personal assistants, and vacations. One user noted he might spend his oil money “on a jet…to escape the wrath of my fellow citizens.”

But this simple, sometimes flippant, exercise on Twitter is getting people thinking—and talking—about an important issue. While common, the resource curse is not inevitable. It is not a truism. In fact, there are opportunities to stem this problem. And those opportunities might even start on Twitter.

Footnotes:

¹ There are exceptions to this rule, of course. For example, an international effort has done a tremendous, and commendable, job with convincing many women to stop buying “blood diamonds.” Unfortunately this hasn’t solved the problem.