July 12, 2007

TYLER COWEN ON RESOURCES AND CORRUPTION:

It is unfortunate that economists have to debate whether natural resources are a blessing or a curse for a developing nation. Minerals, diamonds or oil may appear to represent automatic wealth but resource-rich countries usually become mired in corruption. High oil revenues, for instance, allow a government to maintain power and reward political supporters without doing much for its people. The government of Nigeria has taken in billions from high oil prices, yet the average person was probably better off 40 years ago. The easy-to-reach wealth of a resource also encourages coups, and thus political stability is problematic.

The solution is to make these governments more accountable in spending their money, but how can that be done? Paul Collier, an economics professor at Oxford University, has a new and potentially powerful idea.

I got a copy of Collier’s book, The Bottom Billion: Why the Poorest Countries are Failing and What to Do About It in the mail, but I haven’t read it. But read Tyler’s article for a summary of the issue. Corruption and lack of accountability are a serious problem, as Nigeria certainly demonstrates. In fact, what worries me about Iraq is that Nigeria may plausibly represent an upper bound for civil society in a country with ethnic divisions, oil wealth, and a history of widespread corruption.

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