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12/18/2005:

"The Price of Oil"

...Take a look at Nigeria, which has the misfortune of possessing more than 35 billion barrels of oil, much of it around the Niger Delta. When I visited last year, traveling through stunted mangrove swamps near Port Harcourt, there was a near-absence of birds, and oil was everywhere - not only dripping from rusty platforms atop the delta waters, but in the water itself, in the air, which smelled of petroleum, and in the gas flares that are a scalding feature of the injured landscape. Because of a host of political and economic ills triggered by the drilling, the Niger Delta is alive not with marine life but with violence - bands of tribal warriors wage an off-and-on war against one another and army troops.

Ecuador is another victim. After oil was discovered in its Oriente region in 1967, Texaco and a state-owned oil company operated an extraction program that, a quarter century later, had reduced parts of the Amazon to a deforested miasma of pollution and poverty. Chevron, which purchased Texaco, now faces a billion-dollar lawsuit accusing it of poisoning the land. Ecuador had a negligible foreign debt before oil was found but now owes $16 billion and, the greatest insult of all, more than 70 percent of the population now lives in poverty.

The harms suffered by these countries (and many others) are symptoms of what is known as the resource curse. Though it seems counterintuitive - countries with a lot of oil are lucky and rich, right? - a succession of studies, the most notable of which was conducted by the economists Jeffrey Sachs and Andrew Warner, show that countries dependent on natural-resource exports experience lower growth rates than countries that have nonresource economies, and they suffer greater amounts of repression and conflict too. The reasons are complex - and there are exceptions to these dismal rules - but in general, a reliance on oil discourages investment in other industries, makes governments less responsive to the desires of citizens and fosters corruption by officials seeking and receiving funds that are not their due. An oil state is, almost by definition, a dysfunctional state.
nytimes.com

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