Tuesday, May 11, 2004

Is It Just the Curse?
Tom Friedman's Sunday New York Times editorial was entitled "The Curse of Oil." Along with a clever comparison involving robots, he focused on the differences in productivity and creativity between countries lacking natural resources, including Japan, Korea, and Taiwan, when compared to Saudi Arabia and other Arab countries that have abundant oil reserves.

Much has been written about the so-called "resource curse", particularly in relation to oil-rich West Africa. A sudden infusion of oil wealth can certainly work against the development of a healthy domestic economy and sound, transparent institutions. But although there is likely an element of this at play in the Arab world, I am not sure it is as important a factor as some others.

The comparison breaks down in other ways, as well. Mr. Frieman, himself, cites the more positive examples of Jordan, Morocco, Tunisia, Bahrain, Dubai, and Qatar, without noting that the first three have essentially no oil, while the latter three are (or were, in the case of Bahrain) blessed with a great deal of oil for their size. For that matter, Egypt probably didn't start the 20th century with a worse hand than Japan, in terms of resources, education, and institutions, though you'd never know it from a comparison of the two countries' situation today.

Finally, how does one explain the experience of the United States, which is the antithesis of the Resource Curse theory? Even in terms of oil--ignoring the profusion of other resources with which this country was endowed--we had as much under our land when Col. Drake drilled his first well in 1857 as did either Saudi Arabia or the entire former Soviet Union, and we have produced more of it to date than any other country.

At the end of the day, it's just too pat to say that the Arabs have poor economies because they have oil. Bernard Lewis and other scholars have more thoughtful explanations for the apparent discrepancies, as do Mr. Friedman's past columns.

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