The Paradox of Plenty: Oil Booms and Petro-States

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The Paradox of Plenty: Oil Booms and Petro-States

By Terry Lynn Karl
University of California Press, 1997
342 pp. $55.00
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The core of this book is devoted to the twentieth-century evolution of Venezuela from an agrarian economy into a centralized "petro-state," overwhelmingly dependent on the petroleum industry not only for exports but also for government revenue. Drawing on the collateral experience of Algeria, Indonesia, Iran, Nigeria, and, for contrast, Norway, the author puts forward the thesis that prolonged mineral booms, where proceeds accrue to the government, not only lead to a loss of financial discipline and deterioration in competitiveness of agriculture and industry, but also shape the character of poorly developed states. They encourage a culture of rent-seeking rather than productive activity and of avoiding both domestic taxation and the political systems of accountability associated with it. The paradoxical legacy of oil wealth is therefore much greater fragility in governmental and civic institutions than in states less well endowed with mineral resources. This thesis is perhaps overdrawn, giving insufficient weight to other factors that led to the Iranian Revolution and to political instability in Algeria and Nigeria, but it is well argued and has the ring of truth.