Oil On Troubled Waters

by Theodore Dalrymple (Dec. 2007)

Quite often one reads that such-and-such a country – the Congo, for example – is impoverished in spite of its abundant natural resources. The tone is usually pained and a little surprised; the writer seems to think that natural resources ought to develop themselves and benefit populations without human intervention, by jumping out of the ground and distributing themselves equitably, for example.

Without political wisdom, however, abundant natural resources are more often a curse than a blessing. Many of the most prosperous and best-governed areas of the world, by contrast, are not at all well-favoured by nature. Man is not at his best when he receives or hopes for something for nothing.
I first realised this on an island called Nauru, which was in the Central Pacific. It was about ten miles in circumference and was for a time the richest country in the world, though with a population of only 4000 indigenous inhabitants.
For almost all their history, the Nauruans had lived off fish and coconuts, in a state of what anthropologists called a generous subsistence. But their island was covered in phosphate rock that was valued as a fertiliser. Appropriated by Germany at the end of the nineteenth century, the island passed under Australian, British and New Zealand rule during the First World War, and the phosphate was mined by the British Phosphate Commission, an amalgamation of British, Australian and New Zealand interests.
Then, in 1968, the Nauruans received their independence and gained control over their own resources. Overnight, more or less, they became very rich, but the results were not altogether happy. Foreigners worked the mines, while Nauruans received the proceeds. Everything became a free gift, though some had more free gifts than others, since land ownership and therefore phosphate royalties were unequally distributed. But everyone received a house, water, electricity and telephone free of charge.
This was not a recipe for industriousness. The Nauruans became physically inactive and ate enormously, on average 5000 calories per day (one person was found who managed 14,000). They liked sweet drinks, and drank Fanta by the carton of 24 tins, and also Chateau d’Yquem. Within a short time, about half of them were diabetic.
Unfortunately, the phosphate ran out, leaving their island a moonscape. Only too predictably, they were swindled by con-men out of their financial reserves, and their traditional way of life had in the meantime been destroyed. The tragedy would never have happened but for the phosphate.
Nigeria was another country that I visited that was cursed by the existence of natural resources, in this case oil; or rather by political inability to take proper advantage of them. What seemed like good fortune was soon turned into ill-fortune. 
Like most countries in Africa, Nigeria was a geo-political expression. While it has undoubtedly developed some identity of its own, it contains within itself a very large number of distinct ethnic and language groups. The oil, which soon became overwhelmingly its most important export, other than people, was concentrated in one small part of the country.
Nigerian politics became the struggle for the control of the oil revenues. The foreign exchange receipts from oil meant that Nigeria could import everything cheaper than it could produce it itself, including food. A Nigerian minister famously once said that Nigeria’s problem would not be how to obtain money, but how to spend it. Nigerian agriculture, previously promising, went into decline and a hideous urbanisation ensued.
While the Nigerian oil revenues were huge, they were not adequate to ensure a high standard of living for everyone even if they had been distributed equally rather than appropriated by political and military elites who struggled for the control of them. This struggle was the principle business of Nigerian public life.
I used to visit Nigeria regularly, and knew the writer, Ken Saro-Wiwa, who was subsequently hanged by the dictator, General Abacha. Saro-Wiwa, who wrote a wonderful novel of the Nigerian civil war called Sozaboy. He came from the Niger Delta, where the oil also came from, and he started a political movement to try to obtain oil revenues for his particular tribe, the Ogoni. Although much of the oil came from Ogoniland, the Ogoni had received almost no financial benefit from it whatsoever. Instead, their native creeks, forests and fishing grounds had been largely destroyed by oil leaks.
I discussed his movement with him when I went to see him in Port Harcourt, the largest city in the area, and took the pessimistic view that it was bound before long to provoke violence; but Saro-Wiwa, a non-violent man with a wonderful sense of humour, told me that the situation was already so bad that it could get no worse. Alas, I was proved right; and Saro-Wiwa not only lost his life, but violence became endemic in the area. (Of course, it is possible that it would have done so even without his initiative.) At any rate, oil proved a blessing to no one in Nigeria who did not get his hands on a large part of the loot.
This brings us to Messrs Putin and Chavez, whose positions surely depend on the existence in their countries of huge oil and gas reserves. Would either of them have been possible without oil and gas? And are they not both of them leading their respective countries to disaster?
It is true that Chavez lost the referendum that would have granted him the presidency for life, if he felt like it, by a small margin, and congratulated his opponents on their victory. But his most significant words after his defeat were ‘For now, we could not do it.’ In other words, if at first you don’t succeed, try, try, again. It is in the nature of plebiscitary regimes that plebiscites are held until the population gets the answer right according to the leader or to the right-thinking elite, whereafter there is no further plebiscite, at least on that subject.
Chavez is a Latin American caudillo whose populist measures are possible only because of oil revenues. In other respects he reminds me of the nineteenth century Bolivian President, General Melgarejo, who once said ‘I’m going to rule in Bolivia as long as I like and I’ll have anyone who doesn’t like it hanged from the nearest tree.’ Chavez also reminds me of the nineteenth century Guatemalan dictator, Rufino Barrios, who was once seen to take the Guatemalan constitution out of his pocket, fold it in four, place it on a chair and sit on it.
Chavez is the most flamboyant and extravagant of Venezuela’s corrupt squanderers of oil revenues, promising huge numbers of people the illusion of a share of the unearned wealth that will melt away like snow in the spring sunshine. Chavez is the product of a combination of oil money and political unwisdom, the latest twist in a vicious spiral of past corruption and present resentment, that produces more corruption and then more resentment. Venezuela has had oil bonanzas before and squandered the money on schemes not wholly different from Chavez’s, leaving the country no better off when the oil price collapsed than it would have been had the oil price never risen in the first place. The tragedy (if lost opportunity is a tragedy) is repeating itself, though this time with the possibility of a true dictatorship emerging.  
Putin is altogether a more serious and sinister figure. When all is said and done, there is about Chavez the air of the preposterous and posturing buffoon, as there was about Mussolini. Moreover, Venezuela will never be able to threaten the peace of the world in any serious way. Russia is different.
It is true that Russia is as dependent upon oil and gas for its exports as any tin-pot country, but that does not mean that it is itself tin-pot. It was always wrong to regard the Soviet Union as the Upper Volta with rockets: the Upper Volta didn’t and never would have made rockets, but the Soviet Union did. Russia is resurgent thanks to its oil and gas, and this is good news neither for Russia nor for the rest of the world.
Oil and gas revenues have allowed Mr Putin to appear to the Russian people as if he were the answer to Russia’s chronic economic woes, and they have been more than willing to trade a little freedom, of whose benefits they were never fully convinced anyway, for a little order. But without oil and gas, Mr Putin’s record would have looked very different, and there would have been no compensation for his authoritarianism. The most that one can say of him is that did not entirely ruin the hand that chance dealt him. At any rate, oil and gas have played their part in preserving the Russian authoritarian tradition which, while it might suit the Russian temperament, has not brought them much happiness.
So huge have been the Russian oil and gas revenues – Russia now has the third largest foreign currency reserves in the world – that it has been able to pursue a guns and butter policy. Not only is Western Europe now utterly dependent upon Russia for its gas supplies, Germany alone to the tune of 80 per cent (and Russia has already tried the weapon of reducing the gas supply to its weaker neighbours), but it has the only considerable military force left in Europe. The combination of deep pockets, monopolies of energy supply and military force, resentment at defeat in the Cold War and its pre-existing political traditions is not a reassuring one.  
It is not even as if the Russian people can expect much good to come of this. Military power has always seemed more important to Russian regimes than the welfare of the people, a long-term effect, perhaps, of the Mongol invasion. And if, for some reason, Russian exports of oil and gas decline, the scene will be set for real turmoil.

By contrast, Norway has used its oil revenues with considerable wisdom. This is not to say that the Norwegians are a supremely happy nation, that they laugh for joy as they walk around in Oslo; but they have never struck observers as being very jolly, perhaps for reasons of geography and climate. But they have not squandered their oil money, preferring to invest it against the day when it will run out.
The Norwegians have not permitted any of the money to be invested in Norway itself, for fear of distorting the local economy, and neither are they using the income that the money brings: in other words, the Norwegians have had to live as if there were no oil money. Given their rather puritanical view of life, it may be doubted whether they will ever feel entirely at moral ease living on the dividends that their foresight and restraint will have entitled them to. I somehow rather doubt it, in which case they will just go on accumulating more and more assets, like old fashioned misers in their counting houses, while spending a certain amount of their wealth on bad causes such as aid to Africa.
But their miserliness will at least give them choices, that Chavez’s populist squanderomania will never give to the Venezuelans. The point, however, is that the Norwegian caution and good sense preceded the arrival of the oil money, and were not created by the oil. They grew out of the pre-existing culture.
This, it seems to me, is an important lesson: that there is no single formula for success or failure in the world, and that good sense and wisdom come from within, not from without. In current circumstances, Venezuela could no more behave like Norway than Norway could behave like Venezuela, though both have huge oil and gas revenues. If Chavez were overthrown, I do not think that the oil money would be vastly better spent, though the regime might be decidedly less dictatorial, any more than I would expect Norway to become a sink of light-hearted and frivolous corruption if the opposition were elected to power.
I hesitate to quote Marx, but when he said that while men made their history they did not make it in any way they liked, I think he was right. And this is something that framers of foreign policy should always bear in mind. 

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