What do Teodoro Obiang Nguema Mbasogo, Bashar al-Assad, Muammar Gaddafi, and the House of Saud have in common? Leif Wenar, chair of philosophy and law at King’s College London, has a three-letter answer: oil.
His new book, Blood Oil: Tyrants, Violence, and the Rules That Run the World, is a radical proposal for how and why a moral coalition of countries should stop buying commodities that bankroll toxic regimes in order to bring about change in poor, undemocratic countries and position themselves to be on the right side of history.
Leif joined us at CGD’s office in London on Tuesday as part of a series of policy breakfasts co-hosted by CGD and the Omidyar Network. We organise these events to highlight how transparency and accountability in our institutions, governments, and commerce with the rest of the world can deliver sustainable wins for development. The events bring together people from government, the boards of private-sector firms, and the spectrum of advocacy and research organisations. (We want everyone from civil servants to board chairs to speak their minds, so our policy breakfasts happen on the Chatham house rule — we’ll talk about what was said, but not about who came or who said what).
Which one is not like the others?
Leif’s analysis is concise. Natural resources aren’t like manufacturing and they aren’t like agriculture: all you need to make money from, say, rare earth metals, or crude oil, or gold is a (willing, often foreign) mining company. This frees you from the pesky business of providing services, satisfying the needs of a population, or otherwise developing and delivering on a social contract (“You’ll let me run the country, but I’ll give you roads and not arbitrarily jail you and your kin”). This makes natural resources, to use his words, one of the largest sources of unaccountable power in the world. No country that gets most of its state revenue from oil has ever transitioned from autocratic rule to democracy. And because the prize is so rich, commodities are worth fighting over: the evidence strongly suggests that commodities like precious stones or oil make civil conflicts more likely and make them last longer.
Leif’s analysis is eloquent, and the diagnosis is neither new nor unproved. The phrase resource curse entered the lexicon in the early 90s, when the economist Richard Auty coined it to describe the pernicious effects on governance and growth of what should be a blessing to the public treasury. In the paper that launched a thousand studies, Jeffrey Sachs and Andrew Warner found a strong correlation between the share of natural resources in a country’s exports and sluggish economic growth.
Fixing it
Leif’s diagnosis is that when we buy commodities sold by dubious actors we fatten the bank accounts of the very regimes, autocrats, or militias that we should be working the hardest to undermine. His argument for change springs, perhaps unsurprisingly, from ethics. Resources belong to the people of a country; if they can’t possibly agree to how they are being sold (and reap none of the benefits), buying those commodities is tantamount to trafficking in stolen goods.
When we buy crude oil from Equatorial Guinea, one of the “world’s best examples of the resource curse", the argument goes, we are abetting President Obiang’s theft from his fellow Equatoguineans. And recognising these regimes’ right to sell us these resources is a weirdly Janus-faced policy, giving back with one hand what the other works to take away with sanctions, moral suasion, international pressure, or even military action.
Fixing this means opting out of this trade. Blood Oil proposes that we reject tainted rulers’ property rights over the natural resources they must to sell to prop up their states. The policy, in short, is to make it illegal to buy these commodities from any country where people could not possibly agree to their sale.
Consider crude oil. If a coalition of Western countries stopped buying oil from countries that failed a transparently measured test of internal freedom, it would bisect the international oil market. ‘Clean’ oil could be exported from some countries and ‘dirty’ oil from others (thus his branding of the policy, ‘clean trade’). According to Leif’s parsing of the data of the global oil trade, about 51 percent of crude oil comes from countries that would probably fail such a test; if China and India signed on to clean trade, it would put the dirtiest regimes under nearly insurmountable pressure.
Getting better
Most of us at the policy breakfast bought the moral case. But there are practical concerns about how to make this work as a policy. For example, how could we tackle transshipment of dirty oil through clean jurisdictions? And wouldn’t buying exports from countries that aren’t in our coalition be like buying transshipped oil? Leif’s book treats many of these concerns, and others. For example, we could tax exports from places that import dirty commodities.
There are certainly other aspects to the implementation of this plan that gave us pause — starving some states of income might make things much worse in the short-term for ordinary people, while the elite remain barricaded and insulated. (It’s worth noting, though, that a key difference between clean trade and sanctions is that clean trade would target the kinds of exports that dubious regimes rely on, while sanctions tend to penalise much broader classes of exports, potentially impoverishing many more ordinary people).
But perhaps the most compelling argument for clean trade is that we’ve done something like it before, and done so in the face of enormous costs. Parliament’s Slavery Abolition Act of 1833 freed nearly 800,000 slaves in the face of vociferous opposition. This wasn’t politically expedient, and, because the disgusting truth is that slavery was good business, it was astonishingly expensive: buying off slave owners for emancipating their “property” cost taxpayers £17 billion in today’s terms, an incredible 40 percent of the entire 1834 government budget. And though this is a high point, it fits into a longer, hopeful reading of history as our gradual curtailment of a state’s absolute rights, like our agreement that genocide is a crime wherever it happens, or the international recognition of the Rights of the Child. (The two countries that haven’t ratified the CRC? Somalia and, incredibly, the United States.)
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Blood Oil promises to be a potent cocktail, one part astute analysis of the political economy of autocracy, and one half a radical proposal for what we can do to combat it. There are challenges to implementing the programme Leif proposes. Despite these, it may also be something quite simple: the right thing do. That alone is an argument for engaging with his thesis. As he memorably put it during the policy breakfast, “the resource curse is a problem as serious as slavery and colonialism. It demands serious solutions.”
At CGD, we try to have a laser-like focus on how we can shape the rules of the international game to deliver sustainable wins in development. Leif’s scholarship chimes with many of our other initiatives, like preemptive contract sanctions (corrupt and autocratic rulers get a special subsidy from being able to write contracts that our legal systems honour, and this is a subsidy that we should end) and Oil to Cash (fighting the resource curse by using Alaska-style direct payments of resource rents to citizens).
No surprise, then, that we think Leif’s book and the policy fixes it proposes will be both a call to arms and a programme for change. We look forward to working more with him to see how CGD can help to translate these compelling and original ideas to action.
Blood Oil will be published in December 2015 by Oxford University Press. It’s available for pre-order here. Our thanks to CGD alumna Alice Lépissier for helping to organise this policy breakfast.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
