GIGW-C4: Resource Curse and Corruption §

Class: IS402 Created Time: October 27, 2021 2:19 PM Database: Class Notes Database Last Edited Time: March 20, 2022 10:55 PM Type: Presentation Notes

• Resource curse: the failure of state to use its own resources to improve its own country.

Historical Rise of Governance §

• Resource curse comes from problems of governance
• Oil rich countries before 1990s were put through Western Imperialism
  • Africa
  • Oil companies shift blame of exploitation to politicians
• Corruption focused analysis
  • Corruption can’t be seen through actions of actors
  • must be seen through global level as well as domestic
• There are flaws in measuring corruptions
• Before 1990s: Western Imperialism of Africa
  • Poverty, hunger, political instability
• 1990s: focus on environmental change and corruption
• Government should be at fault for not solving societal problems from revenues of oil/resource rich countries.

The Queue §

• What is the queue?
• How the queue can describe why mineral-dependent countries tend to be more corrupt than others:
  • Disturb in physical queue (economic shock or terrorist attack):
  • Push in at the front (loss of trust in order)
    • people lose trust in the system
  • They’re trying to divert those resources for their own good.

How resource divide a nation? §

• Agricolia : the north and the south share similar benefit.
• Petroland : the north and the south compete to earn more benefit resulting is social fragile at all level.
• Polarization and social fragmentation are affected by conflict over mineral money.
• Diversion can occur by religious, ethnicity, political faction, and horizontal division
• Oil dependence and oil-based political conflict can lead to the fragmentation of a nation.

Petroland as the queue §

• Agricolia represent the diverse network of production and better subsequent collaboration.
• Petroland represents what people are queuing or competing for.
• The “misuse” and “private gain” are the core behavior in corruption.

VI. Cross-Border Corruption §

• Corruption is a global problem

  • Financial institutions even in global level

  💡 Corruption Perception Index: Switzerland is the least corrupt country, but it wasn’t accurate

• Elf system-Gabon and nearby countries slush funding French political parties and intelligent services

• Extractive Industries Transparency Initiatives (EITI)

  • country-to-country approach

• Investigating role of tax and tax havens

• Transparency international-going through significant organizational changes → more engaging in tax havens

Alternative Ways of thinking about Corruption §

• Elites abusing public goods to advance narrow interest:
• widen inequality, increase poverty, and undermines the faith in government
• people depend heavily on perceptions of what others do
• Italy: people that pay tax are called a bit thick headed
• tax compliance depends positively on individual’s perceptions of others compliance level

Policy §

Approaches

• systemic solution that counteracts the government allocation of money is democracy
• deeply analyze the division in society, economic policy, and the distribution of resources:
  • who will benefits, how should policy be changed, or does financial liberalization work
• Transparency: state that lack transparency undergo two process
  • the secret of government’s earning, funding source, and what they use it for
  • citizens will be outraged about corruption and protest
• changing transparency relationship will help
  • citizens don’t use mobilization

Analysis §

• corruptions come from big and powerful countries
• pattern of corruption: elite and the rich and politically powerful groups of people
  • makes corruption unavoidable
  • people are selfish and greedy
  • people are competitive
• we want all of what we gain
• honesty and trust should be build from individuals
  • A leader of a country must show transparency or corruption will prosper

Distributing oil revenues directly: an answer? §

• Distributing oil revenues directly, and equally, to all citizens in a producer country, then taxing them directly on their income.
  • systematic solution
• The benefits of this policy are:
  • There is the welfare effect: direct transactions creates long term wealth and income
  • It transforms the nature of politics: economic competition instead of relying on political lobbying
• Objection on this policy:
  • Giving citizens money, then taxing them, is inefficient and costly.
  • Citizens have direct incentives to spend wisely; politicians often have incentives to spend unwisely.
  • In an ideal world, a ‘queue’ might be a good way of distributing benefits from oil.

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Q&A §

• How can Cambodia learn from the concept of resource curse?
  • Be careful about who we do bussiness or associate with
  • Not rely on one source of income such as natural resources
    • Don’t put all your eggs in one basket
  • To focus on the long term success and not just short term
    • Some resource rich countries become greedy and not manage their profits properly
• Would these resource rich countries do any better if they didn’t have a colonial past?
  • Institutions and systems are left over and used after colonialism
  • without colonial power there would still be in-fighting
    • Ex: South Sudanese groups civil war for natural resources
    • Unwillingness to share resources and riches in domestic setting