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Natural Resources and Democracy in Political Economy

Introduction

Natural resources, specifically petroleum, natural gas, and minerals, have been linked to high-levels of corruption and authoritarian leadership. Bolivia, Indonesia, Belarus, and Congo among others are considered resource cursed countries (Haber and Menaldo 6). Much of political economy literature presents both theoretical and empirical arguments to understand the issue. Consequently, literature shows the existence of both resource curse and resource blessing across various countries. One major claim fronted is the resource rent, which ultimately leads to poor governance (Dunning 60).

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In addition, resource exploitation itself is considered as a rent-seeking engagement that facilitates rent seeking in different sectors of the economy and restricting growth. Some scholars have used empirical evidence to demonstrate that natural resources facilitate authoritarian regimes. On the other hand, it has also been demonstrated that some resource rich nations have realized resource blessing characterized by low-levels of corruption and authoritative tendencies. These observations have puzzled scholars for years. As such, it remains clear how natural resources influence political economy and governance of countries. In this political economy essay, an attempt is made to explore this puzzle and present a balanced argument based on both theoretical, empirical, and critical assessments.

Theoretical Analysis

Political economy literature has employed various theories to explain the relationship between natural resources and forms of governance. Theories generally demonstrate that authoritarian political regimes or democratic political regimes may emanate in natural resource rich countries. In fact, Michael Ross (325) claims that political scientists have pointed out the extremely odd features of oil as a natural resource. Most researchers have shown that when income increases, governments tend to be more democratic (Ross 325). Conversely, Ross (325) points out that this rule does not apply in other cases. That is, a rise in income levels is more likely to result in dwindling democracy.

The claim that oil wealth or wealth from other natural resources often hinders progress to democracy is based on the theory of resource curse. According to the resource curse theory, minerals and oil abundance in poorly developed countries often drive unfavorable developmental outcomes demonstrated by massive corruption, poor economic outcomes, retarded economic growth, inefficient government, and substantial political violence. That is, poor countries endowed with abundant natural resources tend to experience a curse rather a blessing. The theory is based on the notion that a curse will affect countries over time (Andersen and Ross 993).

Haber and Menaldo claimed that the resource curse theory was not about change, but about levels witnessed in states. That is, variables had to be expressed in higher levels and, therefore, higher levels of depending on natural resources are generally responsible for lower levels of democracy while lower levels of dependence on natural resources in a country will ultimately lead to higher levels of democracy over time (Andersen and Ross 1004). This idea emanated from Mahdayy in 1970 when he argued that revenues from oil in the Middle East countries were directly collected as external sources of rents by governments that never accounted to the public (Haber and Menaldo 1).

Based on this notion, political scientists have developed the concept of natural resource rents and authoritarianism (Haber and Menaldo 1). It is argued that representation can only be attained through taxation without any exceptions. Further, oil revenues are collected by states, which then escalate the state bureaucracy power. Since the accrued revenues are most likely to reduce or eliminate taxation altogether, they also eliminate or reduce cases of the public subjected to taxation. As such, low levels of taxation leads to low demands for representation. Scholars point out specific examples to support the resource curse theory. Venezuela, Bolivia, and many resource-rich sub-Saharan African countries, which are poorer today than they were at independence (Dunning 34) are examples of countries that support the theory of resource curse.

Ross (332-336) highlights three theories to support the lack of democracy in oil-rich nations (these theories are mainly derived from studies done in the Middle East). The rentier effect is linked to the resource curse theory – governments spend oil revenues on social pressures to reduce accountability. The notion is based on low taxation (taxation effect), spending effect (heavy spending to reduce pressure for democracy), and group formation effect (spending to prevent the rise of independent groups that may demand for accountability). The repression effect is noted on increased spending on internal security and therefore prevents the public from democratic aspiration. Finally, modernization theory shows that if economic developments cannot produce social and cultural changes noted in urbanization, higher levels of education, and occupational specialization, then democracy is difficult to achieve (the case of Libya and Kuwait).

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Some scholars have however demonstrated that the theory is flawed. For instance, Haber and Menaldo (1-26) use historical data analyzed from 1800 to demonstrate that there is no resource curse.

Conversely, the theory of resource blessing has also emerged. It appears counterintuitive to present a new narrative of resource blessing against the standard narrative of natural resource wealth as a curse for democracy and economic growth. However, current literature strives to show that natural resources can facilitate democratic processes and create stable institutions and countries. In fact, the notion that abundance of natural resource is beneficial to economic development is supported by Haber and Menaldo (1-26) and mentioned by Dunning (5) and Andersen and Ross (1003). The idea is based on nationalization of natural resources to facilitate and gauge national development. In fact, it argued that natural resources are responsible for democracy in Botswana, Mongolia, and Peru among others (Haber and Menaldo 6).

Overall, the resource curse theory and other examined theories demonstrate casual mechanisms, such as power, control, and institutions, which governments use to restrict or promote accountability while minimizing or improving democratization.

To prove such claims, researchers have conducted extensive studies using data drawn from various countries covering significant periods before, during, and even after the natural resource boom.

Empirical Analysis

Andersen and Ross (993–1021) observe that the claim by Haber and Menaldo that no resource curse exists is partially right for the period before 1970s, but flawed after 1980s because of the obvious widespread resource curse. They argue that the resource curse was witnessed after the events of the 1970s that facilitated the collection of oil rents previously looted by foreign-owned companies. The relationship between oil and democracy is vital, as well as other variables such as period, resource-reliant states, polity, incomes from resources, and fiscal reliance among others.

Based on these observations, Andersen and Ross (993–1021) show that natural resources do indeed promote autocracy. Dunning attempts to challenge the conventional claim of resource curse, but he ends up with two valid arguments that oil and mineral wealth can result in both democracy and autocracy using different mechanisms. Hence, it is imperative to comprehend these mechanisms to identify when democratic or authoritarian outcomes are comparatively strong. Statistical modeling and game-theoretic models can help to understand such relations. Ross (325-361) after analyzing time-series cross-national data from 113 states between 1971 and 1997 to explore three aspects of the oil-impedes-democracy claim concluded that oil does negatively affect democracy even in poor nations with relatively small exports. Second, harmful effects of oil on democracy go beyond the Middle East. That is, it affects all countries across the world. In addition, non-oil natural resources also have similar effects on democracy.

It is imperative to recognize that authors covered in this essay show balanced accounts of influences of natural resources on democracy. That is, they all discuss diverse aspects of resource blessings and resource curses across many countries globally to ensure that analyses are not restricted to few countries. For instance, Haber and Menaldo (1-26) address the problem of the negative association between natural resources and democracy using time-series centric techniques on unique historical datasets. The authors tested possible long-run association between regime types and resource dependence within states over periods, and they concluded that increased dependence on natural resources was not related to authoritarianism. In fact, study results indicated several aspects of resource blessing.

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Critical Assessment

The four authors present incredible findings about association between democracy and natural resources in political economy. One must appreciate that all the works have both theoretical and empirical underpinnings. As such, they strive to present balanced arguments based on theories and data to draw inferences. Consequently, Ross (325-361) and Andersen and Ross (993–1021) support the resource curse theory. Conversely, a study by Haber and Menaldo (1-26) demonstrates resource blessing while Dunning attempts to go beyond resource curse and resource blessing to show that natural resources can result in both autocracy and democracy based on how they are exploited and distributed within a country. Scholars and students interested in political economy and influences of natural resources on countries, as well as democratic practices would find these works extremely useful.

One must note that the major constraints of these works could be linked to datasets used, historic periods, and other possible variables, such as institutions that could influence outcomes of the use of natural resource wealth and its effects on democracy.

These works fit well within political economy theories and build on previous studies to prove and disapprove theories of resource curse and resource blessing, but data used are original and specific to countries.

So far, in political economy of natural resources, the theories of resource curse and resource blessing have presented the best explanations for the outcomes observed. On this note, scholars require additional empirical evidence to support these theories.

Although all the works used in this essay demonstrate well-researched and presented articles, the work by Haber and Menaldo (1-26) goes against the standard narrative of resource curse to present resource blessing. Interestingly, Andersen and Ross (993–1021) show that the findings by the later were flawed. Hence, the work by Anderson and Ross introduce some variables not previously used in the study that showed resource blessing. Besides, Dunning also presents a good book by demonstrating that both democracy and autocracy are possible outcomes but through different methods while Ross only confirms the known fact of resource cursing.

Works Cited

Andersen, Jørgen J. and Michael L. Ross. “The Big Oil Change: A Closer Look at the Haber–Menaldo Analysis.” Comparative Political Studies 47.7 (2014): 993–1021. Print.

Dunning, Thad. Crude Democracy: Natural Resource Wealth and Political Regimes. Cambridge, UK: Cambridge University Press, 2008. Print.

Haber, Stephen and Victor Menaldo. “Do Natural Resources Fuel Authoritarianism? Reappraisal of the Resource Curse.” American Political Science Review (2011): 1-26. Print.

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Ross, Michael L. “Does Oil Hinder Democracy?” World Politics 53 (2001): 325-361. Print.

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