1 - The Puzzle of Extractive Resource Nationalization

Summary

The book begins with three paradoxes of Libya, Venezuela, and Congo that juxtapose the profound importance of nationalization in the global natural resource economy with its economic risks and potential costs. The chapter then previews the answer to the puzzle of operational nationalization: when faced with the choice of nationalization, weak rulers discount the long-run costs of state intervention to seize its short-term gains; by contrast, strong leaders maintain the status quo of privately run operations to ensure long-term gains from private production. Next, the chapter illustrates the relevance of nationalization in a variety of research contexts: the effects of state intervention in the market; the roles of domestic leadership and international conditions in institutional choice; the significance of this choice during state formation; and the logic of the predatory state. After briefly introducing the theory of how, why, and when different operational nationalization pathways matter for politics, the chapter concludes by outlining how the remaining chapters of the book explain and test the operational nationalization theory.