Oil Wealth: A Very Mixed Blessing
Jahangir Amuzegar is an adjunct professor at the School of Advanced International Studies, Johns Hopkins University. From 1973 to 1979 he was an Executive Director of the International Monetary Fund. He is the author of Comparative Economics: Priorities, Policies, and Performance, and other works.See more by this author
For nearly a decade now, the spotlighted fortunes of some oil-exporting countries have been a focus of global interest. Raw materials exporters among the less-developed countries have dreamed of being able one day to establish a producers' association similar to the Organization of Petroleum Exporting Countries (OPEC). The industrial powers have helplessly watched their political clout and economic affluence dwindle before the kingdom of oil. The capital-short and aspiring Third World planners have kept telling themselves (and each other) that if only they had this black gold, the magical élan vital for their economic takeoff would be close at hand.
With the significant jump in the price of oil in 1973-74, and the projected transfer of wealth to the oil exporters, the dawn of prosperity and progress for the petroleum-rich countries was widely and uncritically presaged. OPEC's immense and growing revenues were exponentially projected not only to improve balances of external payments, but also to help finance domestic development and defense needs. The Midas touch of oil was expected to reduce domestic costs of living through larger supply of (oil-financed) imports. Massive oil receipts were widely believed not only to enlarge and extend domestic goods and services, but to make budgetary deficits fiscally extinct. Vast new opportunities for wise domestic investments were to guarantee gainful employment for the rising labor force. Rapid, all-around economic prosperity was thought to be achievable without forced saving or painful belt tightening. Material prosperity and progress, in turn, were hopefully believed to lead to more social cohesion, greater political stability, a meaningful industrial democracy, and an eventual advanced-country status.