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« MSRI Books | Main | Boiling Alive »

June 17, 2005

Comments

dearieme

Kosher oil, eh? Will that let them drive their cars in the Sabbath?

Jim

"Oil's distortionary effect on small economies is not limited to Third World countries:"

Truer words were never spoken. Example - Texas. Then again.... In fact, maybe the presence of large amounts of oil serves to keep Texas Thrid World in its politics.

João da Costa

"Oil's distortionary effect on small economies is not limited to Third World countries:"

What I find interesting is the comparison between oil and gold in the African scene.
By oil I mean countries like Nigeria or Angola, and by gold I mean the case of South Africa.
It seems that gold (plus coal and diamonds, etc) is at the source of the industrialisation of South Africa (a medium income country with a First World infrastructure in a major part of it) and seems not to have caused this burden nowadays oft associated with oil possession, but oil in Nigeria, for example, fail to spark even a minimum of said industrialisation (if my sources are correct!).
The difference, it seems, is that gold requires human effort for its extraction and oil, in contrast, barely requires it.
This makes me also remember a kind of critic oft aired in Portuguese politics about the ill effect of the money that that country receives from Brussels and that sometimes sparks some corruption at high or medium levels of government.
For a country, it seems, better to earn its lifeblood the hard way!

Abiola Lapite

"The difference, it seems, is that gold requires human effort for its extraction and oil, in contrast, barely requires it."

Yes, gold mining is a more labor-intensive industry, which definitely makes a difference. Still, one shouldn't overlook the fact that it was that very gold which made apartheid economically viable for very many years, and that its benefits flowed primarily to an extremely narrow section of SA's population, with the ordinary black South African's life indicators throughout the period being literally no better than that of neighbors in Mozambique or Tanzania.

"For a country, it seems, better to earn its lifeblood the hard way!"

"Easy come easy go" is the old saying. One is more likely to pay close attention to how money's being spent if the money one's rulers are spending comes from one's own pocket.

Niraj

What effect will the discovery of oil will have on Israelis and Palestinians alike? Will it make them more amenable to peace, or to war?

Abiola Lapite

If there is a strife-ridden region on this planet in which the discovery of oil has aided the cause of peace, I'm yet to hear about it ...

dsquared

For what it's worth, Dutch disease was a result of natural gas rather than oil, but what the what the.

Ghana is a gold state with no oil, and so I think that this particular theory might not be right.

Wayne

In respect of gold helping South Africa it's not such a clear cut scenario.

During the Great Depression the gold price did rise and help the country maintain it's foreign earnings and industry more successfully relative to other parts of the world. So in that regard it helped.

On the other hand there's never really been a major benefication industry locally after it (e.g. jewellery manufacturing). The growth in non-mining industry tended to arise independently of it as well. The second world war fro example saw double digit annual economic growth rates due to huge foreign demand for SA manufactured goods then.

It's been an important forex earner though and as Abiola notes, it did fund the Apartheid Government partly. But it also subjected the country to commodity price fluctuations that affected its currency and economy. Past mining houses also had links to Government officials - and corrupt mining magnates like Brett Kebble and his dubious family members keep the trend up today.

Abiola Lapite

"Ghana is a gold state with no oil, and so I think that this particular theory might not be right."

I don't see anything in Ghana's history that contradicts what I've said. As a down to earth economic matter, it is a fact that sudden wealth from natural resources has a negative effect on other domestic export sectors due to an appreciation in the exchange rate, while it is difficult for most governments to resist the temptation to commit to new spending that stops being affordable once the boom ends (as it always does). Even the Norwegians are finding it difficult to resist this temptation, petrol fund notwithstanding, and Oslo is infamous for its exorbitant prices. Gold at least has the advantage to the local economy of being labor intensive when it's located deep beneath the earth as in SA, so at least some of the wealth gets spread beyond whichever bunch of crooks is currently manning the tiller, and for an actual hard day's work, rather than merely for being born a Saudi, a Venezuelan or whatever.

"But it also subjected the country to commodity price fluctuations that affected its currency and economy. "

Nevertheless, for the 40 years, from the early 1930s until John Vorster's government in the 1970s, the terms of trade moved in South Africa's direction, and it was all that gold which made it possible for successive National Party governments to thumb their noses at the world even while white South Africans enjoyed the sharply rising standard of living which made the place attractive for yet more whites to immigrate to. In fact, it's reasonable to say that it was South Africa's deteriorating terms of trade which pushed the Nationalist leadership to begin waking up from the fantasy that grand apartheid could remain viable indefinitely - hence Vorster's attempts at diplomacy with neighboring countries, his abandonment of Ian Smith, and the recognition of the black trade unions without which the anti-apartheid movement of the 1980s would not have been imaginable.

Wayne

I'll agree on that. Reality and perception were often two very different things when it came to the Apartheid government and allowed rhetoric. I don't think the Nats and many white South Africans were alone in that type of economic thinking either.

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