Reverse the Curse

How Can Oil Help the Poor?

LAND MATTERS

Larry Diamond and Jack Mosbacher (“Petroleum to the People,” September/October 2013) rightly observe that the coming oil boom in Africa is, paradoxically, a frightening prospect for the continent’s poor and marginalized. If the so-called resource curse holds, this new surge of easy money will indeed “poison the prospects for development,” fueling corruption, inflation, and authoritarian regimes. The authors’ proposed solution, however, falls short. Diamond and Mosbacher suggest that governments could reverse the curse by distributing oil revenues directly to the people as taxable income. But doing so would not address the fundamental issue that gives rise to the resource curse in the first place: weak land rights.

Most developing countries still rely on legal frameworks that were originally established for colonial-era exploitation. These laws, many of which are still in place today, vest all natural resources -- and often the associated land, too -- in the state. This means that individuals or communities that own land do not own the minerals, petroleum, timber, water, or other resources attached to it. The state retains that privilege, and it profits from resource extraction by granting licenses and concessions to private firms. Locals thus have little say in contract negotiations and rarely see any of the profits. To further complicate matters, most property ownership, especially in Africa, is not legally recognized, even after generations of traditional use -- making it easier for the government to remove people living in the way of extractive activities.

This setup contrasts markedly with the legal frameworks that govern landownership in those developed countries that have harnessed their natural resources to build strong economies, large middle classes, and democratic societies. In the United States, resource rights attach to individual landownership. In no case does the government automatically own what lies on or underneath privately owned land. The state instead gains revenue from taxing the incomes of landowners and of the companies that help them extract their land’s resources.

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