Monday, September 25, 2006

The rise of the natural resources monopoly dictatorship

It comes in different flavors, but it's here and in our faces at the UN and elsewhere: the Natural Resources Monopoly Dictatorship (NRMD). It's a widespread phenomenon in the Middle East, but it's spreading alarmingly elsewhere too: Russia, Venezuela, Bolivia.

The government controls a valuable natural resource (oil or gas typically). This sector constitutes the lion's share of the country's economy. It inverts the relationship between productive society and tax-dependent government. The government buys off the people and functions however it wishes, with no input from tax-paying voters.

The developed world can look on with concern or horror, but as long as it's using the resource, there are limits to what it can do about NRMD. OTOH, the developed world spooks itself with a false sense of doom: the NRMD does not hold a monpoly weapon ("oil weapon"), except in the short run. In the long run, the NRMD needs to sell as much as we need to buy. Roger Stern of Johns Hopkins University has analyzed this situation brilliantly in this technical economics paper (PDF download; non-technical summary here).

The solution for us is to use less of the NR that's being M'ed by the D. With oil and gas, this isn't hard. If oil- and gas-consuming countries banded together in the same way that petro-producing countries have, they could impose taxes to push their citizens out of their SUVs and "light" trucks and in the right direction. It won't do to declare "energy independence": oil and gas are fungible commodities. And there's no need for hare-brained and dubious schemes for subsidized "alternative" energy technology. If it's economical to start with, oil and gas taxes will make the technology in question attractive on price grounds alone.

And that's the point: to deny the Ds M'ing the NRs the revenue stream. Think of all the Middle Eastern mischief that could be prevented. And no Chavez buffonery at the UN (this decade's recycling of Khrushchev's shoe-banging tantrum at the UN in 1956 -- but this time, less tragedy, more farce). $75/barrel oil buys Holocaust-denial from Ahmadinejad. What would $40/barrel oil buy? Or $30/barrel? Would we even be hearing from the wacky mullah-ocracy in Iran?

Related thoughts from Tom Friedman here, and from the Washington Post.

POSTSCRIPT: The oil minister of Venezuela in the 1970s once famously referred to oil as the "devil's excrement," because of the topsy-turvy things it does to the country whose economy is addicted to selling it. But the countries buying it help things along. Here's a cute cartoon from Venezuela that underscores the point. Translation:

Chavez: "You're a devil, you smell like sulfur, you're a drunk, you're the demon, you're a genocidal Mr. Devil, you're a dictator, you're an assasin Mr. Devil, you're a ...."

Bush: "Yeah, yeah, whatever you say ... fill the tank, kid!"


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