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Fuels Dependence

While the correlation between economic development and democracy is positive, the association between fuels dependence and democracy is negative. The correlation of -0.31 indicates a substantial but not overpowering relationship.

The scatter plot is shown in Fig. 1.3. In the upper-left portion of the graph, we find cases of high democratization/low fuels production; in the lower-left portion of the graph, cases of low democratization/low fuels production. The large number of points stretching from top to bottom on the far left side of the graph makes for a messy visual, but indicates that at a low level of resource endowment there are many cases of full-blown democracy and full-blown autocracy, as well as everything in between.

Perhaps the most interesting part of the figure is the void in the upper- right portion. There are no instances of any country in any year with over $1500 per capita of resource income scoring as high as 0.4 on democracy. The post-communist experience would seem to lend credence to the argument found in the political science literature that oil can spoil democracy’s chances. The severe underperformance in democratization of the hydrocarbon-reliant countries, Russia, Azerbaijan, Kazakhstan, and

Fuel income and democracy, 1992-2012

Fig. 1.3 Fuel income and democracy, 1992-2012

Turkmenistan, as well as the strong performance of so many countries that are not oil exporters, including relatively poor countries such as Albania to Mongolia, adds to the evidence that oil vexes democracy.

The argument is controversial. Some scholars, including specialists on the post-communist region, argue that oil dependence per se does not compromise democracy’s chances. They claim that oil becomes a liability only under certain circumstances. For example, it is possible that patterns of ownership in the oil sector affect whether or not oil curses democracy (Jones Luong and Weinthal 2010). The argument is noteworthy, and Russia’s democracy scores did fall as the oil sector was being renationalized under Putin. Still, a clear causal relationship remains to be shown. It is possible that restatizing previously privatized assets and restoring authoritarian rule were both parts of Putin’s program but were not causally related. Furthermore, the other big hydrocarbon exporters in the region have known nothing but authoritarianism since the demise of the Soviet system.

In broader global context, oil and democracy do not mix comfortably. Not all major oil producers perform as badly on democracy as do the post-communist oil states or, for that matter, the oil-soaked monarchies of the Persian Gulf. Yet they have failed to reach and maintain status as fully open polities, and some analysts point to oil as a possible culprit. Venezuela, Ecuador, Nigeria, and some other oil-reliant countries have avoided full-blown autocracy, but they have not established a recent record of continuous open politics. As of this writing, the only country in the world with a heavily hydrocarbon-reliant economy that also enjoys robust democracy is Norway. Unlike so many other countries, Norway had decades of experience with stable open politics before it became a large hydrocarbon producer in the 1970s. If a country’s people already firmly control the state through an array of strong institutions before striking oil, they may well be able to sustain democracy after the strike. Most developing countries, however, do not find themselves in such an enviable position. In the resource-rich countries of Africa, the MENA, and the post-communist region, fuels began to flow before the possibility of democratization arose, and oil abundance may well contribute to the enduring nonemergence of open politics in these countries.

Yet Mongolia presents a potentially crucial case on this score. It underwent democratization at the time of the demise of its Communist Party regime at the beginning of the 1990s and never looked back. But immense quantities of new energy sources have recently been located in Mongolian soil, and the past half-decade has witnessed the beginning of development of those sources and blistering rates of economic growth as a result. The riches discovered to date are mostly metals and high-quality coal; oil and natural gas have not (yet) been discovered in massive quantity.

A similar story is unfolding in West Africa. The post-communist region and portions of Africa experienced their waves of regime change simultaneously, in the early 1990s. In Africa, like in the post-communist region, the movement to democracy proved to be lasting in some countries and ephemeral in others. In both regions, resource-reliant countries figured prominently among those that underwent abortive transitions or no real transitions at all (Radelet 2010). While democratization continued (and continues) to flounder in Nigeria and never happened at all in oil-reliant Gabon, Congo-Brazzaville, Angola, and Equatorial Guinea, in other countries democracy stuck. It has already persisted for a quarter century in Ghana and Benin, neither ofwhich were major energy producers when they underwent regime change. Since undergoing democratization, however, Ghana has discovered substantial oil reserves, and in recent years has emerged as an energy exporter.

Will Mongolia’s rapid shift to status as a major energy resources producer jeopardize its fledging democratic institutions? How will the process unfold in Ghana? Each country had roughly two decades of democracy under its belt before its resource riches suddenly transformed its economy, much less experience with open politics than Norway had before becoming a major hydrocarbons exporter. Whether, and if so, how, resource abundance will affect the fate of democratization in Mongolia and Ghana poses a fascinating question for research on the relationship between natural resource wealth and political regime.

To summarize the findings from the post-communist region: Not being energy-reliant is consistent with any outcome in terms of political regime, while being energy-reliant is inconsistent with democracy. In the data on the post-communist region, oil is a sufficient but not necessary condition for nondemocratic outcomes. Perhaps the most arresting evidence of an oil curse is the fact that not a single case of successful democratization in the region has occurred in a country that has a hydrocarbon-based economy.

The post-communist experience not only lends weight to the argument that oil curses democracy. It also enriches our understanding of how it curses it.

In their explanations for how oil undermines popular rule, comparative social scientists have emphasized the rentier effect, the truncated modernization effect, and the repression effect. The rentier effect refers to the state’s ability to contain demands for political change by buying off the population. In rentier states such as Qatar, the government can afford to shower the people with social services without taxing them. Under such conditions, according to the argument, people are likely to be too satisfied to rebel against autocracy. The truncated modernization effect refers to how oil production can make a country rich in terms of per capita GDP without necessarily inducing the ensemble of social changes, such as the universalization of literacy and dramatic improvements in public health, that normally accompany modernization driven by rapid improvements in agriculture- and manufacturing- based industrialization. The repression effect refers to the ability of governments to use the superprofits from energy resources to finance powerful militaries and police apparatuses that would be unaffordable in the absence of black gold. Those agencies of coercion can be deployed to shore up authoritarian regimes.

But we do not see these dynamics at work in the post-communist world, at least not as clearly as in many countries outside the region.

The rentier effect is, at best, only weakly present. While oil revenue can swell state coffers in the likes of Russia, there still is not enough oil wealth per capita to buy off the population and thereby preempt any popular dissatisfaction with the regime. The governments of the hydrocarbon economies in the region can afford to provide social services at a somewhat higher level than would be possible in the absence of hydrocarbon rents, but they still must tax their populations. The region has no Kuwaits.

We do not see the truncated modernization effect at work in the region, either. Russia and Kazakhstan and, to a lesser extent, Azerbaijan and Turkmenistan are industrialized countries that do not bear the economic peculiarities, such as a high per capita GDP combined with the persistence of illiteracy, found in oil states such as Libya and Saudi Arabia. The distinctiveness and distortions found in hydrocarbon-rich post-communist economies are due less to resource abundance than to the legacy of the Soviet economic model. These idiosyncrasies, which include underdeveloped agricultural and service sectors and a surfeit of inefficient large-scale manufacturing industry, are common to all Soviet-type command economies, not just the energy producers.

A repression effect cannot be ruled out, and hydrocarbon rents undoubtedly help rulers finance their security apparatuses. Russia’s military modernization has depended in part on a long run of high oil prices. But we have little reason to think that the sprawling police apparatuses that rulers command in Russia, Kazakhstan, Azerbaijan, and Turkmenistan would be much weaker in the absence of oil rents. Nor has oil wealth been necessary to maintain a powerful police state apparatus, as Serbia under Slobodan Milosevic, Belarus under Aleksandr Lukashenko, and Uzbekistan under Islam Karimov show.

But the post-communist experience suggests that oil can poison democracy’s prospects in ways other than by creating a rentier state, truncating modernization, or funding a powerful coercive apparatus. One way that oil has undermined democracy in the region is by what we might call a corruption effect. It elevates the risk of massive official corruption because there is so much to steal and because officials can filch wealth from a stream of resource revenues more furtively than they can from taxes.

Russia shows how rampant corruption can derail regime change in fledgling democracies by denting enthusiasm for open politics at both the elite and mass levels (Fish 2005). This dynamic was amply evident during the 1990s. Leading liberals who assumed high posts in Boris

Yeltsin’s government in the early 1990s were, by the end of the decade, noticeably less enthusiastic about democracy than they had been earlier. Officials had stolen so much and had so much to hide that democracy, with its inquisitive free media and nosey citizens’ groups, did not look so good anymore. At the mass level, many people came to identify democracy with the conversion of the public treasury into a feeding trough for top officials. The spectacle understandably produced popular disillusionment. It bolstered the appeal of Vladimir Putin, a figure who did not pretend to cherish democratic ideals but who promised to deliver justice by putting the state’s house in order and humbling the state-appointed billionaires who pillaged the country’s wealth. During his early years in power, Putin did just that - though he also established his own oligarchy and endowed his favorites with largesse that Yeltsin’s oligarchs could only dream of.

In sum, the post-communist experience provides support for the notion that an abundance of hydrocarbon wealth may countervail democratization. It further shows how it does so. The Russian case, in particular, illustrates how factors other than rentier, truncated modernization, and repression effects may dim democracy’s prospects.

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