Guest Post: More oil, less democracy – Evidence from worldwide crude oil discoveries

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By Kevin Tsui, Assistant Professor in the John E. Walker Department of Economics, Clemson University. Cross posted from VoxEU.

It has been widely argued that natural-resource wealth is a curse that leads to corrupt politicians, closed and illiberal societies, and defunct economies. This column presents new evidence on the political impacts of oil wealth. It argues that the effects depend on geology and history, shedding light on the recent uprisings in the Middle East and North Africa.

Can the recent protests across the Middle East and North Africa help spread democracy in the region? Many respond to this question by pointing out that a lot of these countries have substantial oil wealth and that natural resources are often a curse. For example, oil wealth is said to make bad authoritarian regimes more durable because it enables dictators to become stronger by funding patronage. But how do we reconcile the coexistence of some oil-rich non-democratic regimes, such as Saudi Arabia’s royal family, and some of the most democratic countries, like Norway, where the Norwegian Oil Fund is used to fuel the economy?

Research in economics and political science has found that democracy’s advances are limited in oil-exporting countries (Barro 1999, Ross 2001). In a recent paper (Tsui 2011), I use detailed industrial data on the history of worldwide oil discoveries to provide new evidence for the long-term effect of oil wealth on democracy. While oil exploration and extraction activities extend over time, my data suggest that a country’s major discoveries are usually concentrated in a few years, known as the peak discovery period. For example, while many oil-rich Middle East countries have a peak discovery prior to 1950, Norway’s peak discovery year is 1979. Figure 1 shows the long-term change in democracy in countries before and after their peak discovery. While for democracies oil discovery essentially has no effect, in non-democracies democracy scores for oil and non-oil countries have been diverging since the peak discovery year.

Figure 1. Democracy before and after peak discovery year

Controlling for other factors, I estimate that on average, when non-democratic countries discover 100 billion barrels of oil (approximately the oil endowment of Iraq), it pushes their democracy score about 15 percentage points below trend three decades later. As a point of reference, Bahrain is about 15 percentage points more democratic than Saudi Arabia. So the estimated effect appears to be modest. But taking account of geological factors – such as oil quality, oil-field depth, and other indicators of the costs of extraction – the negative effect of oil on democracy almost doubles. A difference of 30 percentage points in democracy is approximately the difference between Jordan and Saudi Arabia. Moreover, the negative effect of oil is larger the higher the oil quality and the lower the exploration and extraction costs. Norway is a relatively high-cost oil-producing country because of the technological challenge involved in extracting North Sea oil.
Another major finding of this research is that oil discovery has essentially no political impact in democratic countries. Norway has been a democratic country since the beginning of the twentieth century. More than 70 years of democratic experience made Norway a consolidated democracy when oil was discovered in the 1970s – and Norway has not become less democratic since then.

Indeed it is often cited as one of the most robust democracies in the world.
Before the 1950s, Egypt was one of the most democratic countries in the Middle East and North Africa region. Its limited oil discoveries peaked in 1965 and oil production in Egypt has been declining since the mid-1990s. Tunisia has a similar oil history. The findings of my research suggest that the relatively peaceful political transitions in these two countries recently may not be coincidences.

Oil wealth can be a political curse when oil-rich dictators oppose democratic development because they will have more to give up from losing power. However, my study highlights the importance of the possibility of heterogeneous effects when evaluating the social impact of resource wealth. In joint work with Anca Cotet, we find that oil-rich non-democratic countries do not experience more civil war on average. Rather, oil-rich non-democratic countries have significantly higher military expenditures (Cotet and Tsui 2011). In research with Casey Mulligan, we argue that lucrative oil reserves provide strong incentives for greedy dictators to remain in power – and they use fear to deter their greedy political opponents (Mulligan and Tsui 2008, Tsui 2010). In contrast with Egypt and Tunisia, Libya has the largest oil reserves in Africa. Our results shed light on the behavior of oil-rich dictators such as Colonel Gaddafi, as well as internet censorship and control in other oil-rich states such as and Saudi Arabia and the United Arab Emirates.

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  1. Max424

    “Another major finding of this research is that oil discovery has essentially no political impact in democratic countries … Norway a consolidated democracy when oil was discovered in the 1970s – and Norway has not become less democratic since then.”

    Yeah, let’s see how Goody Two-Shoes Norway fairs now that they’re on the backside of peak production.

    Look at what happened to the most advanced, freedom-loving democracy in the history of the post-Big Bang universe.

    Peak production in the United States occurred in 1970, and a scant 40 years later, Americans have buried their democracy so deep archeologists couldn’t find it if they were digging for it with hydrogen bombs.

    Peak Oil brings Fascism, is Fascism, and though it may not kill all living things, Peak Oil will most assuredly wipe democracy off the face of this planet.

    1. Tao Jonesing

      “Americans have buried their democracy so deep archeologists couldn’t find it if they were digging for it with hydrogen bombs.”

      Nicely said.

    2. attempter

      Peak Oil will most assuredly wipe democracy off the face of this planet.

      Since the end of the Oil Age will compel the devolution and relocalization of most economic and political phenomena, and since part of our heritage from the Oil Age is a fully developed democratic political philosophy, I’d say energy descent will be true democracy’s great historical chance. (The age of cheap fossil fuels and rising industrialization and technology was an extremely hostile environment for participatory democracy and true federalism.)

      1. Susan Truxes

        I agree. And it makes me happy to agree. In the sense that happiness is, to some extent, just a sense of relief. We will be fine.

  2. paper mac

    Ah yase, democracy is measured on a scale from zero to one. I don’t have institutional access to the journal Tsui’s paper is published in, but assuming he’s using Barro’s 0-1 “determinants of democracy” scale (which he cites), it’s worth noting that the US received a perfect 1.00 score in 1995. If you believe that the US was perfectly democratic in 1995, there’s something wrong with your model, folks.

  3. Dan Duncan

    What’s good for the Goose is not necessarily good for Lazy Social Scientists.

    This post highlights why social science is such a joke. There’s no rigor and no support for these conclusions.

    In a feeble attempt to make this feeble “discipline” into a hard-science, you’re making ridiculous statements like “A difference of 30 percentage points in democracy is approximately the difference between Jordan and Saudi Arabia.”

    The concept “democracy” has no well-established primary connotation, so all conclusions derived therefrom will be vague and/or self-serving to the agenda of the social “scientist”.

    Let me give you the Primary Connotation of “Primary Connotation”: Primary Connotation is what something must have in order to be classified as that particular something.

    For example, take the word “gander” (as used in connection with geese). This is a word with a stout primary connotation. Inclusion in the “gander” class demands “goose” and “male”. There is no ambiguity. And all extensions of the word “gander” require at least this much: a goose and that it’s male.

    Now that we have a clear-cut rule, we can begin to discuss extensions (ie ganders in Canada vs ganders in Europe). Additionally, we can begin applying various metrics to ganders, because now we all know that a “f*cking gander” is simply a male goose getting his freak on with a female goose.

    But that’s not what social scientists do; and frankly, I understand why: As my comment will attest, this sh*t is boring and it requires more effort to boot.

    Much more interesting to “study” loaded concepts rich in secondary connotation, but near penniless in primary connotation.

    This way, you get to be lazy and “interesting” at the same time.

    Go ahead and extract a primary connotation out of this:

    Right off the bat, we are confronted with what to do with “Religious Democracies”. It’s obvious that your “study” side-steps the Mohammed in the Room. Democracy or not? These people of Faith may (or may not) want an Islam-Inspired Theo-Democracy. Just because your interpretation of this form of governance deems it “undemocratic”, it does not make it so….And this is why working primarily off of secondary connotations is dangerous.
    And lazy.
    And inconclusive.
    And just a big waste of everyone’s time.

    1. JCC

      “And lazy.”

      I’ll grant the others (inconclusive, etc) when it comes to “democracies”, but lazy may be a little unfair, if not harsh. I would suggest that it takes an awful lot of work to try and shoehorn all this into what is supposed to appear as a viable conclusion :-)

      On the other hand… maybe it’s not so wrong. Across the board, for example, I think most people would agree that a relatively poor person with limited education as to how the modern financial world works gains little in the long run after winning the lottery vs. someone who wins that is in a better educational and financial position.

      There have been some interesting books and studies written on this particular subject and all have come to the same, obvious, conclusion.

      It seems to me there may be some correlation regarding the individual vs. (overall) group human condition.

      With that said, I’m not disagreeing with your primary conclusion, Dan. All by itself, the definition of Democracy is very, very slippery and a primary connotation here is practically non-existent.

    2. Martin Finnucane

      Aristotle rushes in where Wittgenstein fears to tread.

      Umberto Eco wrote an essay in the New York Review of Books identifying fascism by Wittgensteinian “family resemblances.” (Unfortunately, only thing I could find online was a teaser: ). The idea being that fascism isn’t some one thing and not anything else, but rather the term “fascism” covers a sort of continuum of institutions, norms, etc. each of which has a resemblance to the others, without there being some kernel of identity shared by all. Under such an analysis, I think we could meaningfully talk of some regime or movement as being “fascist,” “non-fascist,” or “anti-fascist,” but not “30% fascist.”

      So: apply the approach to democracy, mutatis mutandis (as the ole Witt would say in his student days), and the democracy index looks … no, not silly (I was about to write ‘silly’), but Platonic.

      Thank you, ladies and gentlemen. Remember, read the Meno for our next class: . Class dismissed.

  4. Tao Jonesing

    “Mohammad Mosaddegh was the democratically elected Prime Minister of Iran from 1951 to 1953 when he was overthrown in a coup d’état orchestrated by the United States Central Intelligence Agency.”

    Yeah. It’s the oil that makes an oil-rich country non-democratic.

    Prof. Tsui’s essay is one of the most trivial, intellectually lightweight posts that I’ve ever seen on this blog. I’m even more shocked that it is cross-posted on VoxEU.

    1. Foppe

      But don’t you see? Oil wants for the country not to be democratic, and thus (in this case) caused the USA to intervene in Iranian politics.
      On the other hand, I wonder what this means for Norway…

      Anyway, I concur: I don’t really understand why Yves cross-posted this.. Unless I’m missing something, there isn’t anything in the article that is even remotely thought-provoking

      1. Martin Finnucane

        Not thought provoking? Good gob, man, look at the posted comments herein: the poverty of social science, Aristotle, Plato, Wittgenstein, secondary connotations, primary connotations, Mossadegh, the CIA, etc. etc. In short order, we have surveyed human history, cleft truth from obfuscation, grasped the quintessence of the struggle of human existence on this rock we call home. This cross-posted article not only provoked thought, it provoked Thought – How it touched us! How it evoked Meaning from the darkness! How it dignified us in our very Being as Men!

        (Not bad for being slightly hung-over on a Saturday morning, right?)

    2. Indigenous Centurion

      most trivial, intellectually lightweight posts that I’ve ever seen on this blog. I’m even more shocked

      Dutch Disease is previously well documented. Documented and about to disappear. Have we reached Peak Dutch? Who knows? One thing for sure == it would be pleasant to have federal government with enough wisdom to say, “Enough! Enough already!”. If only we could discover more fat oil fields but have the courage to tax domestic production down to a trickle! Is that the message we were getting from the Vladimir Clan of Russia? Were they locking up the kind of crooks that were shipping Russian Oil quickly to offshore customers for fun and profit? All of that is their business, not ours. But we can learn from their nationalism. We can follow their good example. We are custodians of our great great grand children’s America. What would George Washington think of us? Did the original reformers of our beautiful country go to great sacrifice for our inheritance?

      You are my people, Populace!

      Start thinking, My People

  5. MacroAgro

    I don’t think it’s right to take this post has representative of Social Science as a whole. Perhaps it’s just endemic of certain trends in Political Science…

  6. Max424

    “I’d say energy descent will be true democracy’s great historical chance…”

    As a man old enough to remember — like yesterday — the dire warnings of Jimmy “Cardigan” Carter, and having learned what I’ve think learned about humans, I’d say energy descent is a thousand times more likely to root out every last remnant of human decency than it is to bring about true democracy.

    But I could be wrong.

    1. Susan Truxes

      Can’t remember the research about peak oil. Maybe 10 or 15 years ago? Something to do with calcium carbonate (basically marbel) and some other interactions in the frictions of the crust of the moving earth, etc. The gist was that the Russians discovered that oil was not finite. It was constantly being produced in the earth’s crust. So we cannot run out. But this still leaves us with environmental problems which are almost unsurmountable. And the dead sea gulf of mexico. gag me.

      1. Max424

        The Abiotic Theory of Oil has been thoroughly debunked.

        Not that it matters. Even if the theory was valid, all over this planet, tens of thousands of once very full oil reservoirs are now, basically, bone dry, and these empty wells are not refilling, which means; abiotic oil creation, if it happens at all, happens so slowly that it is imperceptible to humans, and is therefore, completely irrelevant.

        Sorry to be a harsh downer, but peak oil is real, and has been reached, and the descent phase of modern civilization has begun. How rapidly our species can adjust to this new reality will define whether we survive or die. It’s that simple.

        1. abiogenic hypothesis

          Second the motion!

          Not trying to sound snarky, but yes the hypothesis argument has now become irrelevant.

  7. Perfect Stranger

    This is as ridiculous as something can be.

    “As a point of reference, Bahrain is about 15 percentage points more democratic than Saudi Arabia.”

    This alone makes this “research” absurd, and this implies that both countries are “democratic”!? How do nations become “democratic”? By declaring them as such or by decree? By commitment to Alliance? By being obedient?

    This supposed to be his credentials:

    “By Kevin Tsui, Assistant Professor in the John E. Walker Department of Economics, Clemson University.”

    No wonder that state of “economic science” is in so poor and untenable condition when guy like him teach at universities. Do not know about Clemson University but those kids who are spending fortune on this alchemy won’t get to far in life. Neither, in science nor in ordinary/common sense life. This is ideological garbage in purest form, it is an indoctrination. It will always be mystery to me how these guys/gals gets its diplomas, or pass any exam?

    As reference point of “democracy” the author use the country of Norway. The question is how democratic the Norway is, or, how we are measuring a democracy? When we contrast his “methodology” with the real life and behavior of Norway’s corporations and government’s duty to Alliance in Brussels we get Norway is just another totalitarian-vassal state, no better than Bahrain and that “betterness” is superficial. The fact is the story of democracy is just fiction, and phantasm may serves the article about dreamland of Norway.

    “Erling Borgen, a Norwegian journalist and producer of documentary films, disagrees In his recent book, The Secrets of the Nation of Peace, Borgen describes some extremely belligerent activities where Norway is engaged. In Afghanistan, Norwegian elite soldiers work side by side with US Special operations forces in “cleaning-up operations”. No Norwegian troops were sent to Iraq, but Norwegian weapons producer Nammo is providing the US, Canada and Australia with bullets and gunpowder, worth 400 million Norwegian crowns (some 80 million US dollars) to be used \ in Iraq. Norwegian DYNO-Nobel enjoys a monopoly, delivering high-explosive ammunition for all US-produced Hellfire rockets which have been put to use both in Iraq and Afghanistan and by Israel in its attacks against Palestine civilians. Norwegian-made radar was delivered to the US just in time for the invasion of Iraq in 2003.

    As do most civilized nations Norway abhors the refugee camp at Guantánamo Bay – and peace price winner Obama has of course promised to dismantle it. Less known is the fact that the big Norwegian firm Aker-Kvaerner until 2006 was in charge of maintenance on Guantánamo, taking care of water and sewage – and fuelling planes delivering inmates from other secret prisons around the world. “We used to call them the Smurfs”, says a former Guantánamo prisoner, referring to the Aker-Kvaerner workers, most of them Filipinos, all dressed in blue look-alike uniforms who took care of practical matters at Guantánamo – such as building the cells where presumed terrorists, among them the Swede Mehdi Gezali, have been held. A Kvaerner subsidiary, Eureka, also produces components to an American weapons system involving cluster bombs whose many small parts cause traumatic damage, particularly when hitting humans.”

    1. GSo

      Being a selfconfessed biased Norwegian I would like to remind you that all the incidents mentioned in your quote failed to cause any uproar in Norway. Norway has since the beginning of time proffited on foreign wars. We sold the oak to the Dutch and British imperial fleets, we proffited handsomly on shipping during WWI and WWII, and later on metals and oil whenever there were major fighting going on. Ammo and maintenance is only small change in this picture. The point is that this has always had an enthusiastic backing from the people of Norway by unrestricted popular vote. If that isn’t a well functioning democracy, then please name one.

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