Jon Krause

Escaping the Oil Curse

Economists and other development specialists know why oil riches so often turn out to be a curse for countries. But they also know that political leaders have free will, and that countries can choose to use their resource bonanzas for the long-term economic advancement of their peoples.

CAMBRIDGE – Libyans have a new lease on life, a feeling that, at long last, they are the masters of their own fate. Perhaps Iraqis, after a decade of warfare, feel the same way. Both countries are oil producers, and there is widespread expectation among their citizens that that wealth will be a big advantage in rebuilding their societies.

Meanwhile, in Africa, Ghana has begun pumping oil for the first time, and Uganda is about to do so as well. Indeed, from West Africa to Mongolia, countries are experiencing windfalls from new discoveries of oil and mineral wealth. Heightening the euphoria are the historic levels that oil and mineral prices have reached on world markets over the last four years.

Many countries have been in this position before, exhilarated by natural-resource bonanzas, only to see the boom end in disappointment and the opportunity squandered, with little payoff in terms of a better quality of life for their people. But, whether in Libya or Ghana, political leaders today have an advantage: most are well aware of history, and want to know how to avoid the infamous natural-resource “curse.”

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