There has always been one clear exception to the general truism that wealthier countries are more democratic – the oil-rich states of the Middle East. Countries that are particularly rich in natural resources – whether it is oil or diamonds or something else – often have lower levels of political freedom than other countries. This is what is called “The Oil Curse” and this video will discuss some of the reasons why this might be the case. To summarize, oil rich countries are often able to buy off their citizens and opponents – by providing cash transfers and good social services, they are able to remain stable autocracies where other countries would transition to democracy.
First off, a point of clarification. When we are talking about resource-rich states, we are not talking about countries with the biggest crude oil reserves or the biggest refiners or producers of petroleum products. We are talking about countries whose economies are dominated by oil production in one form or another. Oil production per se is not the problem – the United States is after all currently the biggest producer and consumer of oil in the world. The problem is countries that rely on income from natural resources to support their economies.
These types of countries are often called “rentier” states because they rely on rents (income) from natural resource extraction and production.
One of the first scholars to popularize this idea was Michael Ross, who found that for the years 1971 to 1997, natural resource wealth was strongly negatively correlated with democracy. Specifically, increasing oil exports by $10 billion/year is associated with a half-point decline in a country’s democracy score according to Polity (a 10-point democracy scale). Ross argues there are three reasons this might be the case, and finds limited support for all three:
- A rentier effect: governments use money from natural resource exports to keep taxes low and social spending high, reducing demand for democracy;
- A repression effect: goverments are able to spend more money on their security services, enabling them to repress demonstrations more effectively; and
- A modernization effect: oil-based growth does not lead to a growth of a middle class that would demand democracy (as per modernization theory).
Many people have challenged these findings, however. Indeed, using different measures of revenue from natural resources and different measures of democracy can eliminate the statistical relationship that Ross demonstrated. Others have found that oil revenue simply supports the stability of an existing regime type – authoritarian countries remain authoritarian and democratic countries remain democratic (Haber and Menaldo 2011). Thad Dunning, in his book Crude Democracy, demonstrates how natural resource rents can in fact support democratization because it reduces pressure to raise taxes on the rich. Examining cases in Latin America and building off theories of inequality and democracy (and the idea that the rich don’t want democracy because it leads to tax hikes), he argues that since revenue from oil and gas can be directed to social services for the poor, that reduces elite opposition to liberalization.
While the correlation between different types of natural resource wealth and dictatorship remain solid, with the oil rich states of the Middle East remaining autocratic, current research focuses on the other factors (alternate explanations or confounding variables) that make these countries unique (notably, their small population size) that make rentier effects possible sources of autocratic stability. In addition, it has expanded attention to the relationship between natural resources and civil war. If “greed-based” theories of civil war are correct, then countries with natural resources may be more autocratic because they are more prone to civil war, not because of the resources themselves.
Finally, more attention has been devoted to a different mechanism for how oil wealth supports dictatorship – corruption. By supporting the development of extractive, as opposed to inclusive institutions, natural resources may foster autocracy.
Political science has found support for each of these – there are strong and robust correlations between petroleum wealth and the durability of dictatorship, grand corruption, and civil war in low-income countries. Understanding further how this process works remains one of our challenges ahead.