Two dead ends of development

Countries that are rich in natural resources often experience limited economic growth and a tendency towards violent conflict. According to the theory of the rentier economy, it’s the national elites that directly benefit from high incomes from natural resource exports. Their ability to distribute such revenue as they see fit, without accountability to the general population, encourages poor governance. Protectorates – territories governed on an interim basis by foreign powers, usually after the intervention of an international peacekeeping force – also experience great difficulty in overcoming poverty. “Dead ends of transition” tackles both phenomena and asks how such countries can be freed from the development impasse.

Richard Auty’s article in the first part of the book drafts a model of the political economy in heavily-populated, resource-rich authoritarian nations. Elites take in the revenue derived from rents and allocate it to their clientist networks in a paternalistic manner. They thus encourage the development of an inefficient bureaucracy, and obstruct the diversification of industry and the modernisation of the commodities sector. Referring to the oil states on the Gulf of Guinea, however, Ricardo Soares de Oliveira shows that resources should not be considered a curse per se, but that the context should also be taken into account – the countries’ history before the commodities were discovered, the capability of the state and the political culture, for instance.

The second part of the book describes ways of avoiding the resource curse. In countries such as Norway, Alaska and Kuwait there are oil funds to help balance out price fluctuations and ensure the well-being of future generations when the oil runs out. Botswana, rich in diamonds, was spared the resource curse, because well-functioning government institutions had been set up before the diamond deposits were found.

The third part is devoted to the transformation of protectorates. Case studies of Iraq, Liberia and Sierra Leone, Kosovo and Bosnia-Herzegovina outline the dead ends of development in those states, working out lessons learnt and political recommendations.

Merging the discussion of rentier economies on the one hand and protectorates on the other is not altogether convincing. A central theme of the book is that rentier economies often lead to violent conflict and foreign intervention. In some cases the state then becomes a protectorate of the foreign power. An analogy is also drawn between rents from mining and so-called “geopolitical rents” such as development assistance. The analytical introduction by Michael Dauderstädt does not justify plausibly the focus on two different patterns of political economy. The book does not deliver a systematic comparison analysis, as would be desirable for the search of possible solutions.

Lili Fuhr