Humphreys et al - Escaping the Resource Curse

Humphreys, M., Sachs, J.D., Stiglitz, J.E., eds., Escaping the Resource Curse, (New York, Columbia University Press, 2007)

The 'resource curse' is often defined as the propensity of states with large reserves of natural resources, to be less developed than States who lack the said wealth and who typically rely on internal taxation or alternative sectors for national development. The editors set the stage in the Introduction by defining the characteristics of the “curse” namely: the “Dutch disease,” commodity price volatility, and the lack of adequate institutions to deal with the abundant revenues associated with the resources. According to the authors, the key ingredients for overcoming the curse are transparency and accountability. Transparency resonates in the subsequent chapters and is an overriding theme throughout the publication.

The authors endeavour to present practical solutions to a phenomenon that has gripped resource rich countries for decades, and combine theory and practice while at the same time addressing some of the key political and socio-economic effects. The book is designed for governments and policy-makers in resource rich Countries and is divided in three parts.

Part I comprises chapters discussing ways through which govern­ments can improve their negotiations with oil companies, and introduce negotiations as a vital skill, a link which is often missing on the part of the Government negotiators.

Part II discusses the technical aspects of managing the macro-economy. With features on the dire effects oil wealth can have other non-resource based sectors and ways to reverse such trends. Others focus on resource revenues and natural resource fund management, with practical steps towards transparent and effectively managed resource revenues sectors. This, the author cites as mainly being achieved through curbing the incentives to spend in the short term while at the same time making it politically advantageous to do so.

Part III follows the theme of the previous parts by focusing on the legal frameworks needed for creating sound revenue management policies. This analysis is supplemented by key country specific examples, the effects of their laws backed by pros and cons.

In the Conclusion, the editors attempt to bring all of the pieces of the preceding chapters together by making recommenda­tions that span the legal, political, economic, socio-economic, and theoretical aspects. The proposals include addressing the stan­dards set for multinational corporations and improving on transparent access for resources by creat­ing public information sites and offices on oil and gas revenues that would build on initiatives already on the ground, such as the “Extractive Industries Transparency Initiative” and “Publish What You Pay”. Overall the book is a good resource for Policy-makers, especially those in developing economies, as a good guide to the do’s and don’ts of the industry. 

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