Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-23T22:59:01.088Z Has data issue: false hasContentIssue false
  • English
  • Français

Sharing the Riches of the Earth: Democratizing Natural Resource-Led Development

Published online by Cambridge University Press:  28 September 2012

Keith Slack
Get access Rights & Permissions [Opens in a new window]

Abstract

Many developing countries are attempting to use their natural resource endowments – notably oil, natural gas, and minerals such as gold – as the basis for economic growth and development. Recent history, however, indicates that countries that depend heavily on resource extraction do more poorly on a variety of economic indicators, including growth rates, education levels, and income inequality. This is due in significant part to the way in which wealth derived from resource extraction is concentrated in the hands of a small elite, which often misuses these revenues through corruption, poorly planned investments, and other means. This contrasts with other kinds of economic activity, such as agriculture, in which benefits are distributed more widely. Thus, a key to increasing the development and poverty reduction benefit value of resource extraction is breaking elite control of these revenues and increasing public involvement in decision-making related to their use. Doing so would enhance the likelihood that these funds would be employed with greater concern for the needs of the populace. The experiences of Ecuador, Peru, and Bolivia highlight the importance of increasing distributive justice and public participation in resource revenue distribution and provide insights into how this could be implemented in resource-dependent economies.

Type
Articles
Information
Ethics & International Affairs , Volume 18 , Issue 1 , March 2004 , pp. 47 - 62
Copyright
Copyright © Carnegie Council for Ethics in International Affairs 2004

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 Two mining-dependent countries, Chile and Botswana, have achieved strong economic growth over the past decade, but their successes may not be replicable due to limited global demand for copper and the cartel pricing of diamonds (Chile and Botswana's main exports, respectively). No developing countries have been able successfully to convert oil or natural gas into sustained growth and poverty reduction. On the contrary, some of the most spectacular development failures, such as Nigeria, Ecuador, and Venezuela, have oil-dependent economiesGoogle Scholar.

2 For each of these problems see, respectively, Carlos Leite and Jens Weidmann, “Does Mother Nature Corrupt? Natural Resources, Corruption and Economic Growth” (IMF Working Paper WP/99/85, July 1999); Thorvaldur, Gylfason, Natural Resources, Education and Economic Development, European Economic Review 45: (2001) pp. 847–59.Google Scholar; Sachs, Jeffrey and Warner, Andrew, “Natural Resource Abundance and Economic Growth” (Development Discussion Paper no. 517a, Harvard Institute for International Development, 1995)Google Scholar; Auty, Richard, “Conclusions: Resource Abundance, Growth Collapse, and Policy,” in Auty, Richard, ed., Resource Abundance and Economic Development (Oxford: Oxford University Press, 2001), pp. 1–22Google Scholar; Birdsall, Nancy, Pinckney, Thomas, and Sabot, Richard, “Natural Resources, Human Capital and Growth,” in Auty, , ed., Resource Abundance and Economic Development, pp. 1–32Google Scholar; Isham, Jonathan, Woolcock, Michael, Pritchett, Lant, and Busby, Gwen, “The Varieties of Rentier Experience: How Natural Resource Export Structures Affect the Political Economy of Economic Growth” (World Bank, 2002)Google Scholar; Ross, Michael, “Does Oil Hinder Democracy?” World Politics 53 (April 2001), pp. 325–61CrossRefGoogle Scholar; and Ross, Michael, “Extractive Sectors and the Poor” (Washington, D.C.: Oxfam America, 2001), p. 8Google Scholar.

3 Ross, , “Extractive Sectors and the Poor ,” p. 7Google Scholar.

4 See, e.g., Power, Thomas, “Digging to Development? A Historical Look at Mining and Economic Development” (Washington, D.C.: Oxfam America, 2002Google Scholar).

5 Surowiecki, James, “The Real Price of Oil ,” New Yorker, December 3, 2001, p. 41Google Scholar.

6 Eifert, Benn, Gelb, Alan, and Borge Tallroth, Nils, “The Political Economy of Fiscal Policy and Economic Management in Oil Exporting Countries ” ( World Bank Policy Research Working Paper 2899, October 2002), p. 19Google Scholar.

7 Ross, , “Extractive Sectors and the Poor ,” p. 9Google Scholar.

8 Ibid., p. 10Google Scholar.

9 Gelb, Alan, ed., Oil Windfalls: Blessing or Curse? (New York: Oxford University Press, 1988), p.134–44Google Scholar.

10 Ross, , “Extractive Sectors and the Poor,” p. 10Google Scholar.

11 Eifert, , Gelb, , and Tallroth, , “Political Economy in Oil Exporting Countries ,” p. 5Google Scholar.

12 See, generally, Ascher, William, Why Governments Waste Natural Resources: Policy Failures in Developing Countries (Baltimore, Md.: Johns Hopkins University Press, 1999Google Scholar).

13 The effectiveness of this distribution may also be a key factor in other issues affecting the state, including conflict. Herbst postulates that conflict around natural resources is largely determined by the predictability and equity of resource revenue distribution. See Jeffrey Herbst, “The Politics of Revenue Sharing in Resource-Dependent States” (United Nations University/World Institute for Development Economics Research Discussion Paper 2001/43, July 2001), p. 5Google Scholar.

14 Power, “Digging to Development?” p. 21Google Scholar.

15 Ascher, , Why Governments Waste Natural Resources , p. 22Google Scholar.

16 Isham et al., “The Varieties of Rentier Experience,” p. 11; and Xavier Sala-i-Martin and Arvind Subramanian, “Addressing the Natural Resource Curse: An Illustration from Nigeria” (IMF Working Paper WP/03/139, July 2003)Google Scholar.

17 Isham et al., “The Varieties of Rentier Experience,” p. 19Google Scholar.

18 See Auty, “Resource Abundance, Growth Collapse, and Policy,” p. 18Google Scholar.

19 IbidGoogle Scholar.

20 Ascher, , Why Governments Waste Natural Resources , p. 21Google Scholar.

21 Ibid.Google Scholar

22 Birdsall, , Pinckney, and Sabot, , “Natural Resources, Human Capital and Growth ,” p. 22Google Scholar.

23 Birdsall, Nancy and Hamoudi, Amar, “Commodity Dependence, Trade, and Growth: When ‘Openness’ Is Not Enough” (Washington, D.C.: Center for Global Development, May 2002), p. 21Google Scholar.

24 Nancy, Birdsall, “Why Inequality Matters”, Ethics & International Affairs 15, no. 2 (2001), p. 18 .Google Scholar.

25 It should be noted that in some extractive projects, because of incentives such as tax breaks offered to attract investment, revenues accruing to governments can actually be quite smallGoogle Scholar.

26 See http://www.ifc.org.

27 As will be discussed below in the context of Ecuador, Peru, and Bolivia, this situation may be changing as social protest over unfair resource extraction practices has reached a point in some countries where it may be jeopardizing future foreign investment in these sectors.Google Scholar

28 The mid-1990s protests in the United States and Europe against Royal Dutch Shell over the execution of Nigerian human rights activist Ken Saro-Wiwa are perhaps one exception to this general ruleGoogle Scholar.

29 Auty, Richard and Mikesell, Raymond, Sustainable Development in Mineral Economies (Oxford: Clarendon Press, 1998), p. 45Google Scholar.

30 Eifert, , Gelb, , and Tallroth, , “Political Economy in Oil Exporting Countries ,” p. 13Google Scholar.

31 See Eifert, Gelb, and Tallroth, “Political Economy in Oil Exporting Countries”; and Aidan Davy, Kathryn McPhail, and Favian Sandoval Moreno, “BPXC's Operations in Casanare, Colombia: Factoring Social Concerns into Development Decisionmaking” (Social Development Papers, World Bank, Paper no. 31, July 1999), p. 30Google Scholar.

32 Sala-i-Martin and Subramanian, “Addressing the Natural Resource Curse”; and Thomas I. Palley, “Combating the Natural Resource Curse with Citizen Revenue Distribution Funds: Oil and the Case of Iraq” (Open Society Institute, July 2003, unpublished)Google Scholar.

33 Sala-i-Martin and Subramanian, “Addressing the Natural Resource Curse,” p. 20Google Scholar.

34 Auty, “Resource Abundance, Growth Collapse, and Policy.”Google Scholar

35 Quoted in Maria Aycrigg, “Participation and the World Bank: Success, Constraints, and Responses” (draft for discussion, Social Development Papers, World Bank, November 1998), p. 1Google Scholar.

36 Forero, Juan and Rohter, Larry, “Native Latins Are Astir and Thirsty for Power ,” New York Times, March 22, 2003, p. A3Google Scholar; Lucas, Kintto, “Indigenous Peoples Decry War and Oil,” Inter Press Service, January 21, 2002Google Scholar; and Tobar, Hector, “Across the Americas, Indigenous Peoples Make Themselves Heard,” Los Angeles Times, October 19, 2003, p. 1Google Scholar.

37 Luis Lopez Follegatti, Jose, Silva Preciado, Alfredo, and Kuramoto, Juana, “Informe Final: Canon Minero y Descentralizacion ” ( Lima: LABOR, 2002Google Scholar).

38 World Bank and Inter-American Development Bank, Peru: Restoring Fiscal Discipline for Poverty Reduction: A Public Expenditure Review (Washington, D.C.: World Bank, October 24, 2002), p.14Google Scholar.

39 José de Echave, Cooperaccion (Lima, Peru), interview, October 15, 2002Google Scholar.

40 World Bank and Inter-American Development Bank, Peru: Restoring Fiscal Discipline , p. 2Google Scholar.

41 In the case of the newly constructed Antamina project, the world's largest copper and zinc mine, the Peruvian government has granted the operating company an eight-year exemption on profit taxes.Google Scholar

42 World Bank and Inter-American Development Bank, Peru: Restoring Fiscal Discipline , p. 3Google Scholar, emphasis added.

43 Wray, Natalia, Pueblos Indigenas Amazonicos y Actividad Petrolera en el Ecuador: Conflictos, Estrategias e Impactos (Quito: IBIS, 2000Google Scholar).

44 Ricardo Pazmiño (ECORAE), personal communication, March 12, 2003Google Scholar.

45 Mario Melo, Centre de Derechos Economicosy Sociales, personal communication, January 17, 2003Google Scholar.

46 World Bank official, personal communication, March 5, 2003Google Scholar.

47 Gutierrez, Lucio, “Address,” Center for Strategic and International Studies, Washington, D.C., February 10, 2003Google Scholar.

48 Carlos Enriquez, Juan, “Mineria y minerales de Bolivia en la transicion hace el desarrollo sustentable ” ( La Paz: Servicios Ambientales S.A., 2001Google Scholar).

49 McMahon, Gary and Remy, Felix, eds., Large Mines and the Community: Socioeconomic and Environmental Effects in Latin America, Canada, and Spain (IDRC and World Bank, 2001), p. 76Google Scholar.

50 Ibid., p. 53Google Scholar.

51 Enriquez, , “Mineria y minerales de Bolivia ,” p. 63Google Scholar.

52 Lykke Andersen and Robert Farris, “Natural Gas and Income Distribution in Bolivia” (Andean Competitiveness Project, Harvard Institute for International Development and Corporacion Andino de Fomento, February 2002), p. 10Google Scholar.

53 Jorge Cortes, Colectivo de Estudios Aplicados al Desarollo Social (Santa Cruz, Bolivia), personal communication, June 19, 2002Google Scholar.

54 Eleodoro Mayorga Alba, “Oil Industry Training for Indigenous People: The Bolivian Experience” (United Nations Development Program/World Bank Energy Sector Management Assistance Programme Report 244/01, September 2001), p. 14Google Scholar.

55 Altaian, David and Lalander, Rickard, “Bolivia's Popular Participation Law: An Undemocratic Democ-ratisation Process?” in Hadenious, Alex, ed., Decentralisation and Local Governance (Stockholm: Almqvist & Wiksell International, 2003), p. 2Google Scholar.

56 Kohl, Benjamin, “Stabilizing Neoliberalism in Bolivia: Popular Participation and Privatization ,” Political Geography 21, no. 4 (2002), p. 465CrossRefGoogle Scholar.

57 Mate, Kwabena, “Communities, Civil Society Organisations and the Management of Mineral Wealth ” ( paper prepared for the Mining, Minerals and Sustainable Development project, April 2002), p. 5Google Scholar; available at http://www.iied.org/mmsd.

58 Barton, Barry, “Underlying Concepts and Theoretical Issues in Public Participation in Resources Development,” in Zillman, Donald, Lucas, Alastair, and Pring, George (Rock), eds., Human Rights in Natural Resource Development: Public Participation in the Sustainable Development of Mining and Energy Resources (Oxford: Oxford University Press, 2002), p. 88Google Scholar.

59 Environmental News Service , “Peru Swaps Debt for Tropical Rainforest,” June 26, 2002Google Scholar.