Oil: The Criminal Crutch

Oil retards growth. The presence of oil retards growth. This flies in the face of conventional wisdom. This idea is not unique to me but I see validity within it. Let’s see if I can explain.

Currently, as I write this, oil is priced about 76$/barrel, according to Bloomberg.com. A gallon of regular unleaded gas pumped in the town in which I am located runs about $2.76/gallon (Speedway).

Oil is supposed to be a wonderful benefactor for the countries in which oil is the primary industry (or is a primary industry). But lets look at some of those countries.

Iraq: Oil made it USA’s friend, until Iraq’s Saddam Hussein began causing trouble. He did not invest in the oil infrastructure nor did he seek to provide economic opportunities by diversifying his economy. Iraq is geographically positioned to be a source of industry, commerce, knowledge, and agricultural products. There is no reason why it could not be a self-sustaining economy.

Iran: Has to import fuel because profits from its own oil sales have not been used to build more refineries. In fact, many Iranians are curious to know where the money has really gone.

Saudi Arabia: Led by a monarchy, one family. While it has attempted to diversify the economy, 75% of its budget revenues come from oil, and 90% of its export revenue is oil-based (CIA.gov). Almost 50% of the Saudi Gross Domestic Product comes from oil. Not a particularly diversified economy. Now, they are instituting some reforms; but they have been pumping oil from SA for decades and only now they have decided that they might want to pass along the benefits to their own people. Women still fall well short of men in terms of literacy; 30% of women 15 years and older cannot read or write (CIA.gov).

Nigeria: Is a mess. The government is fighting a civil war over control of its oil fields. The Movement for the Emancipation of the Niger Delta is fighting for control of the oil fields. In recent months, they have attacked foreign oil workers, oil equipment, taken hostages, and shot journalists covering the war. Nigerian oil exports are well off past production numbers. Oil accounts for 20% of Nigeria’s DGP and 95% of its foreign exchange. Again, oil is nothing new to Nigeria, and government corruption and mismanagement has prevented growth in Africa’s most populous country, where 40% of women above 15 years of age cannot read or write (CIA.gov).

Venezuela: Another country run by a dictator; well, okay, Hugo Chavez was democratically elected, but since then he was able to get his government to agree to let him rule by decree which is essentially electing him king. Now, he is trying to change Venezuela’s constitution so that he might reign in perpetuity. Otherwise, he would have to give up his post in 2009. Venezuela is the third largest exporter of oil to the United States, behind Canada and Saudi Arabia. President Chavez has apparently funneled oil profits into social programs, helping to build houses, provide medical care, creating neighborhood food programs, job training, and literacy programs. Venezuela has suffered from years of oil-profit mismanagement, however, military coups, and corruption. Almost 90% of export earnings are from oil sales, and oil accounts for 30% of its GDP.

These countries stand on one leg – oil. They have relied on oil to support themselves, and in doing so they have stagnated. Oil, and reliance on oil, has retarded their growth by retarding their collective imaginations.

Take their oil away and where would these countries be? Would these countries have the innovation, the dreams, the desires, the imagination to develop and evolve in absence of oil? Would their governments try to encourage and promote economic opportunities, encourage and promote education, encourage and promote global investment?

Our current administration seems bound to continue limiting these countries by continuing to emphasize our reliance on these oil-producing nations and by not promoting economic diversification, but by providing them the means to make war on one another. Selling weapons ensures the continued economic divide that exists between the rich and poor, and reinforces the cultural divide between the Shia and Sunni. Weapons ensure that the powers that be within these governments remain in power, maintains the status quo, and contributes to the continued cultural and economic stagnation of these nations.

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