Courtesy Reuters

There Will Be Blood

Michael Ross ("Blood Barrels," May/June 2008) argues that oil triggers conflict in three main ways: fluctuating oil prices lead to economic instability, which is followed by political instability; oil wealth supports insurgencies; and oil wealth encourages separatism. These factors are important, but Ross is too selective. Embedding them in a broader framework would be more illuminating and would better inform policy.

The essence of the problem can be summed up in one word: fragmentation. In many resource-rich countries, politics involves vertical relationships of dependence based on the central source of wealth, and factions compete (or fight) for their share in a grand zero-sum game. This behavior is highly divisive, politically and socially; it reinforces existing fractures, such as ethnic, religious, or regional rivalries, and generates new schisms. As resources flow (or trickle) downward, politics splinters at all levels, from the high echelons of power to the village and even the family level. Other sources of economic rents and aid can have similar effects.

Contrast this with a country such as Denmark or the United States, where wealth is widely distributed, leading citizens to cooperate through trade and in markets and form horizontal relationships that compensate for natural fragmentation. In such countries, governments tax citizens directly, which provides an institution-building stimulus and creates the "no taxation without representation" political bargain that helps build accountability and consensus -- and further counteracts fragmentation. In oil nations, where rulers mostly tax oil companies and can ignore their citizens, no such repairing happens.

Civil war is an obvious result of the fracturing effect of oil, but it is not the only one. Corruption, which involves the promotion of personal or factional interests at the expense of the wider or national interest, is another. Oil-fueled fragmentation, by reinforcing narrow interests and weakening broader ones, is at the heart of the bad governance prevalent in oil states. The degeneration of a nation such as Nigeria into widespread corruption is analogous to the collapse of a well-ordered queue and

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