Russo-Ukrainian War 2014-25

[crazy canuck]

    and Norway

[OttoVonBismarck]

I think a decent part of it is the pattern of development. In the 20th century most non-first world places that ended up having large reserves of oil, experts from Western companies built all the initial oil fields and infrastructure. Those got nationalized in some places and in other places various deals were worked out--but even when ownership eventually devolved to the local government, much of the expert worker staff running the oil infrastructure were foreign (often Western) experts. This is because the local rulers had become dependent on just collecting fat royalties and disbursing it to the population to produce domestic tranquility (and some % went to their personal fortunes and the fortunes of their cronies, the smarter autocrats funneled at least enough to the public to keep them quiet), who did not develop the educational infrastructure and pipeline to produce the sort of technicians and engineers needed to run the infrastructure. This is why Venezuela's oil industry initially collapsed--Maduro pushed out all the trained workers (many of whom were foreigners, or when they were locals, they were not ideologically loyalists) and replaced them with party loyalists, who had no idea what they were doing. Then shortly after of course massive sanctions got levelled on his regime due to his election shenanigans. Aramco is still heavily staffed by foreign experts because despite making one of the better efforts of it of any petrostate, KSA still doesn't produce enough educated people with the incentives to work.

Note that because in such petrostates the profits of the oil are often fueling corrupt entities, there is little meaningful incentive to take that money and invest it in the country's future, the people benefitting from the money are not invested in the future of the country.

Arguably the USSR was setup a tad better because its form of Communism did actually create a lot of homegrown experts and educated people, but a lot of it evaporated in the decades of oligarchy, a lot of shale projects in Russia for example are staffed heavily with Western experts and local Russians doing some of the grunt work. It's odd because Russia had a long history of educating its own experts and people, but I suppose many of the Russians with good educations left (or aged out of the workforce) at some point during the oligarch era, and new ones didn't get minted at a high enough rate.

[Barrister]

The USA always has had incredible natural resources, but we mostly used them internally, rather then just selling them to the rest of the world (although of course we did that as well, but it wasn't the primary economic engine of the country, so far as I can recall).

Canada.  Netherlands.

[DGuller]

Canada.

Do you mean all of Canada, including Alberta?

[Berkut]

  and Norway

Both of which were sane places BEFORE they discovered their export wealth though...

[Sheilbh]

The USA always has had incredible natural resources, but we mostly used them internally, rather then just selling them to the rest of the world (although of course we did that as well, but it wasn't the primary economic engine of the country, so far as I can recall).

The Rest of History podcast recently did a two parter on oil with Helen Thompson. The second episode talked about this a fair bit.

But it's a standard that actually having loads of oil tends to be disastrous/a bit of a curse for a country. Obviously economically there's Dutch disease but also in terms of politics.

But Thompson actually said the US is the interesting case. While US politics doesn't look like Mexico or Russian Empire/Soviet Union/Putin's Russia or the Arab states. But obviously there was a huge issue of Standard Oil in late 19th/early 20th century politics, plus the role of Texas in politics which is absolutely transformed by the discovery of oil within a few decades you have Rayburn and then LBJ who are probably two of the most important and influential politicians in the 20th century - which is powered by oil. It doesn't overpower the US as it does in other countries because there's strong enough other interests to compete with oil, as you say it wasn't the primary economic resource. But it is really interesting to think that even in the US oil exerts such a sudden and immediate economic shift that it's a powerful shaping force in politics.

But I think you're right it's broadly true of almost all natural resources.

  and Norway

Argubaly the UK with North Sea gas too. It changes British politics quite dramatically because the rise of the SNP and Scottish nationalism is very much tied up with "Scotland's oil" but it doesn't fundamentally alter anything - though we used that windfall far less well than the Norwegians.

[The Larch]

Nobody mentioned Australia yet?

There's a reason why the concept of "Resource curse" exists.

[Josquius]

Argubaly the UK with North Sea gas too. It changes British politics quite dramatically because the rise of the SNP and Scottish nationalism is very much tied up with "Scotland's oil" but it doesn't fundamentally alter anything - though we used that windfall far less well than the Norwegians.

Up there with the Falklands as prime examples of thatchers sheer jamminess.

[The Minsky Moment]

There are different aspects and dimensions of the resource curse.

In poor, weak states it tends to manifest where control over valuable resources is used as a substitute for developing a proper fiscal state.  Taxes are low or not collected and the state funds itself through resource rents.  That is desirable for a mafia-style authoritarians (whether styled as Sheikh or Lt Colonel) because it just requires mobilizing sufficient force to maintain control over resource extraction, deter popular uprisings, and defeat rival gangsters.  The leadership can effectively ignore the populace and their needs because they don't need their assent to be taxed to raise the revenue the need to pay off their flunkies and live extravagant lifestyles.  And the light taxation keeps the people quiet even as it deprives the country of the funds needed to develop physical and human capital.  This model is seen at its most abjectly dysfunctional in places like the Congo, but more sophisticated variants exist in the Middle East and the Gulf. 

The Soviet Union did not really follow this model, as it did meaningfully invest in physical capital - albeit inefficiently, and somewhat more effectively in education. Resource rents were not used as a substitute for state building but to compensate for horrible inefficiencies in the rest of the economy. However, the post-Soviet transition destroyed what remained of the industrial base and knowhow outside of the military production complex and either drained away a lot of the human capital or diverted to huckstering and gangsterism.  So when it came time for Putin to reconstitute the state, he did so by asserting control over the oligarchs, who in turn controlled the resource extraction sector.  Thus, Russia became a mafia resource extraction state.

There are also dimensions of a resource curse like "Dutch disease" - countries with large natural resource export sectors are at risk of driving exchange rates up, thus harming the competitiveness of the non-resource sectors.  This can be addressed - typically by recycling petrodollars into overseas investments; the Norway state fund is an example.  But gangster regimes may view this as a feature not a bug - more favorable exchange rates keep luxury imports cheap and they either don't care about broad based industrial development or fear it as a potential threat.

[Duque de Bragança]

Nobody mentioned Australia yet?

There's a reason why the concept of "Resource curse" exists.

Dutch disease should be still pretty much known.

https://en.wikipedia.org/wiki/Dutch_disease

[Richard Hakluyt]

Norway had as much gas and oil as the UK but with only a tenth of the population.

[The Minsky Moment]

Norway had as much gas and oil as the UK but with only a tenth of the population.

Which is why they now have the largest sovereign wealth fund in the world.

[FunkMonk]

Norway had as much gas and oil as the UK but with only a tenth of the population.

Which is why they now have the largest sovereign wealth fund in the world.

Which English football club should they buy, then?

[The Minsky Moment]

Which English football club should they buy, then?

The fund has a reputation for making good investments so the answer is none.

[Jacob]

Norway is not in need of sportswashing, I don't think.