Why not give petrodollars back to the citizens of the countries that produce the Black Stuff? Directly, in cash? A new paper has just come out at an influential Washington think tank, the Center of Global Development , arguing that if that were done in Iraq, even modestly, poverty (which currently affects 20% of the population of this oil rich country) could be abolished inside two years, and that, just as important, it would unleash such interest and attention from the public that governance in the oil industry would never be the same again. This, mind, keeping current government spending level (Iraq is slated to increase production dramatically in the coming years, as the industry finally stabilises post-2003). The same could be viable in Libya. It’s an idea that hacks people off on all sides of the political spectrum, not least because the only place where it has happened to date is the state of Alaska . But babies and bathwater, people (and it long preceded Sarah Palin). Development economists feel it could weaken the state because the government has less money to spend, but the equation of moral authority with purchasing power is depressing. If you “quadruple” legitimacy but halve government revenues, what’s the equation then? There’s also a distinct cultural bias in other critiques which suggest it’s not a good idea to give people stuff. They have to earn it. A bias, btw, which is being increasingly disproved by the movement in humanitarian programs to “cash transfers”. Giving people stuff, it turns out, works , especially with the poor. It also turns out that the poor are generally better financial planners than governments , probably because they suffer less moral hazard. Iraq’s oil has generated over $300 billion since 2003. Gaddafi’s Libya earned over a trillion (present day values), yes, $1,000,000,000,000 for five million people, and yet in both places people are destitute and social fabric is shattered. As Churchill would have said , giving oil money directly back to its owners (in Iraq, as in most countries of the world, mineral rights are assigned to the sovereign people)… giving it back… is the worst possible management policy – apart from all the others. In the 50 years since Nigeria developed an oil industry, it has adopted all of the technical fixes pressed on it by eager technocrats, foreign and local. It’s got a sovereign wealth fund. It has “stabilisation” mechanisms which aim to help it deal with the wild fluctuation in oil prices, and therefore government income, year to year. The respective roles of the ministry, state-owned companies and Big Oil have been endlessly debated and regulated, the balance between the competing demands of the present and future generations (and therefore spending and saving) carefully evaluated in papers, workshops and occasionally editorials. And yet many economists seriously posit that Nigeria would actually have been better off if oil had never been found . In 1970, just after the ruinous Biafran war had ended, there were 19 million Nigerians living in absolute poverty. Now ninety million are. And the latest Wikileaks disclosures suggest that Shell has the Nigerian government in its pocket , or at least thinks it does. In this case it’s *not* the economy, stupid, despite the decades of technical experts bringing technical economics-driven fixes. It’s the politics. Elites in oil-rich countries either buy into, are bought by corrupt, patronage politics, aka rent seeking . The rest of the people are mostly resigned to that, the idea that politics, the economy, your and my careers and lives are determined by the natural resource pie and what matters is to play the game the best you can to make sure you end with the biggest possible portion of the same, limited cake. The mismatch with international engagement is twofold. Of course there are the people we love to hate, the oil companies, who after all want to earn a profit and aren’t shy about that – though I’d say if the appropriate national and international fiscal and regulatory regimes were in place, including serious carbon markets , fair play to them. But there’s a second, less expected though just as problematic, contributing element to the chasm between the reality of life in the slums of Sadr City or the Niger Delta and policies which can actually mitigate that Resource Curse . Which is the orthodoxy of international development that says we can solve these issues with technical solutions, macro-economics. By being clever. By transparency workshops and IMF and World Bank Missions with a big M to educate… Central Bankers, ministries of oil, and, usually as an after thought, civil society and local journalists. But I know the civil society in Iraq that follows transparency in its oil industry. I have met them. They’re brave, dedicated and smart. But they have no access to the corridors of power, or to the skills and technical expertise they need to play catch up with Iraq’s $60 billion a year industry, and its big business accountants and contract lawyers, now retained on both sides of the negotiating table btw. And they can all fit into one medium-sized hotel conference room. I know. I was there. But imagine 15 million Iraqi men and women each with a cheque, or a transfer by mobile phone , and with it a laminated business-card sized “scoresheet” which tells them how the other 85% of oil money the government held onto was spent, year after year. Imagine that just one percent of them are fired up to do something about it, and that a quarter of them ever amounted to anything, became “Disgusted of Tunbridge wells” pestering their MPs, or ministers, or whoever. That would be nearly 40,000 people. A football stadium instead of a hotel conference room. Now try to imagine that everything else about the way oil is run stays the same. Direct oil dividends could target lots of economic and developmental goals — redistribution, financial inclusion, poverty elimination, state cohesion, extending the tax base – a whole lot of things. But that’s not their essence. Their essence is political, in the right way, with these other benefits almost as by- products. When there is a crowded football stadium of hard core transparency activists in Iraq – and millions of armchair spectators at home, cheering them on – that’s when we’ll see progress on Resource Curse.
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