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Political economy, Mr. Churchill, and natural resources

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Abstract

The article recalls Winston Churchill’s advocacy of public ownership of natural resources in Africa in the early 1900s. Following a brief discussion of different countries´ methods of natural resource management, empirical evidence of the cross-country relationship between economic and political diversification and per capita national income is presented to suggest a new channel through which excessive dependence on poorly managed natural resources, including oil and other minerals, may hamper economic and social progress. Constitutional issues, democracy, and human rights are brought to bear on the story to underline the conceptual distinction between state ownership and national ownership of natural resources.

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Notes

  1. Source: World Bank (n.d.), World Development Indicators.

  2. South Korea has fewer natural resources than North Korea.

  3. See The Icelandic Federalist Papers, https://escholarship.org/uc/igs_ifp, No. 15, “Natural Resources as Human Rights.”

  4. For references documenting each of these different channels, see Gylfason and Zoega (2017).

  5. The Icelandic words for “sea baron” (“sægreifi”) and “quota king” (“kvótakóngur”) came up 1920 + 456 = 2376 times in a recent Google search, or more than twice as often as “Russian oligarch” when the search results are adjusted for the 2016 populations of the two countries (144.3 million vs. 0.334 million).

  6. Norway revised its constitution in 2015, mainly to add new provisions on human rights. Earlier, in 1992, a new provision on environmental protection had been added, including: “Natural resources should be made use of on the basis of comprehensive long-term considerations whereby this right will be safeguarded for future generations as well.” This and other quotations from English translations of constitutions in the text are taken from The Comparative Constitutions Project, see https://www.constituteproject.org/.

  7. It was her father who installed her as CEO of the Sonangol Group shortly before stepping down. Her father’s successor as president, João Lourenço, had her removed from her CEO post a short while after taking office in 2017.

  8. The more diversified a country’s exports, the lower the Theil index. Hence the inversion of the index shown in Figure 1A. Like other trade statistics such as export ratios, the Theil index may reflect country size as well as export diversification because large, i.e., populous, countries are more likely than smaller ones to have diversified exports.

  9. Six Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates), characterized by high per capita incomes and low diversification, are not included in the sample. Including them does not change much, however.

  10. See Marshall and Jaggers (2005).

  11. The indices are inverted to make freedom advance from left to right in the figures.

  12. See, for example, references listed in Gylfason and Zoega (2017).

  13. This section draws on joint work with Jean-Pascal Nguessa Nganou, specifically the long 2014 working paper version of the abridged 2016 version of Gylfason and Nguessa Nganou (2014, 2016).

  14. See The Icelandic Federalist Papers, https://escholarship.org/uc/igs_ifp.

  15. An increasing number, currently 43, of national constitutions pronounce the principle of sustainable development. See https://www.constituteproject.org/.

  16. Andersen and Aslaksen (2008) consider a different constitutional angle on natural resource management, reporting that, among democracies, natural resources tend to be better managed by powerful parliaments than by powerful presidents and better managed also under majoritarian (i.e., winner-take-all) electoral systems than under proportional systems.

  17. In 2016, for the first time, foreign tourism generated more foreign exchange earnings in Iceland than the fisheries and the aluminum sector combined.

  18. See United Nations, General Assembly, “Promotion and protection of all human rights, civil, political, economic, social and cultural rights, including the right to development,” 27 June 2016, https://www.article19.org/data/files/Internet_Statement_Adopted.pdf, accessed 9 January 2018. See also how the Independent newspaper reported the resolution 5 July 2016: http://www.independent.co.uk/life-style/gadgets-and-tech/un-declares-online-freedom-to-be-a-human-right-that-must-be-protected-a7120186.html, accessed 9 January 2018.

  19. Specifically, Wenar argues that governments should prevent their corporations from buying resources from severely repressive regimes and civil warriors. For example, he points out that the US government has since 1997 barred American energy companies from trading with the regime in Sudan, citing the regime’s grim record on human rights.

  20. See the UNCHR’s analysis and binding opinion here: http://repository.un.org/bitstream/handle/11176/268220/CCPR_C_91_D_1306_2004-EN.pdf?sequence=1&isAllowed=y

  21. Only 8% of oil consumption is used to power airplanes. Electronic batteries are still too heavy for planes to carry. For an epic history of oil, see Yergin (2009). See also Radetzky (2011).

  22. Finland is classified by the Polity IV Project as a full-fledged democracy from 1944 onward.

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Acknowledgements

The author thanks Arne Jon Isachsen, Gylfi Magnússon, Hermann Oskarsson, Indridi H. Thorláksson, and an anonymous referee for helpful comments on an earlier version of the paper.

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  1. University of Iceland, Reykjavík, Iceland

    Thorvaldur Gylfason

  2. CESifo, University of Munich, Munich, Germany

    Thorvaldur Gylfason

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Gylfason, T. Political economy, Mr. Churchill, and natural resources. Miner Econ 31, 23–34 (2018). https://doi.org/10.1007/s13563-018-0146-y

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