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Page added on March 30, 2008

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Oil may not grease friendship

Marxists argue that oil wealth makes men evil, as suggested by the recent Academy Award–winning film, There Will Be Blood. Public-choice theory offers another intriguing explanation, that governments are no more or less immoral than private actors. When they get control of a resource such as oil, they seek to keep that resource and suppress competition.

The problem may indeed be that commodity wealth tends to crowd out other forms of capital, both intellectual and human. One thinks of another 2007 film, Blood Diamond, about the conflicts in Sierra Leone and a ruthless diamond-hunting colonel who literally deprives villagers of a chance to create by chopping off their hands.
Public-choice theory also provides an explanation for state support of populism and fundamentalist religions. The culture of populism is a culture of adoration; in Venezuela people think less than they did before because President Hugo Chavez promises to think for them. Religious extremism likewise serves the status quo by distracting the man and disenfranchising the woman. Banishing a population to a lifestyle from a millennium ago ensures that the people won’t derive much wealth from new technology — hence, the interest in keeping entire groups, women, for example, illiterate.

Of course, some countries have both large oil deposits and healthy entrepreneurial spirits — Norway, Canada, Britain, Holland and the US. The explanation here, we posit, is that the rule of law and property rights were already firmly in place when the oil discoveries were made. A country with such a structure can therefore absorb the gush of oil more easily, or turn the oil wealth into an advantage. In the case of Saudi Arabia, we posit that the US may be buying friendship in arms trade, military support and aid.

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