Property rights and the resource curse

Philosophy and Public Affairs

Volumn 36, Issue 1, 2008, Pages 2-32

  Wenar, Leilf ^a  

^a NONE

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EID: 42049095712     PISSN: 00483915     EISSN: 10884963     Source Type: Journal    
DOI: 10.1111/j.1088-4963.2008.00122.x     Document Type: Article

References (64)

1. Many people have helped generously with this article. Thanks to Christian Barry, Corey Brettschneider, Lee Buchheit, Micki Chen, Angus Deaton, David Estlund, Cecile Fabre, Katrin Flikschuh, Lisa Fuller, Gerald Gaus, Margaret Gilbert, Robert Goodin, Steven Gross, Mitu Gulati, Nicole Hassoun, Justin Hughes, Carolyn Kissane, Christian List, Branko Milanovic, Riz Mokal, John Mueller, Véronique Muñoz-Dardé, Cara Nine, Alice Obrecht, Evan O'Neil, Aidan O'Neill, Stephanie Oxley, Avia Pasternak, John Phillips, Thomas Pogge, Jedediah Purdy, Sanjay Reddy, Sheri Rosenberg, Yonatan Shemmer, Hillel Steiner, John Tasioulas, and Molly Torsend.
2. Wantchekon surveyed 141 countries over a forty-year period and found that a 1 percent increase in natural resource dependence can increase the likelihood of authoritarian government by nearly 8 percent.
3. Leonard Wantchekon, "Why Do Resource Dependent Countries Have Authoritarian Governments?" Journal of African Finance and Economic Development 5. 2 (2002): 57-77.
4. For example, the repressive Burmese regime remains in power partly by selling the country's natural gas to Thailand and using these revenues to buy weapons from India. The regime is being protected from UN sanctions by China in exchange for access to Burma's large energy reserves.
5. Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley, Calif.: University of California Press, 1997), pp. 58-64.
6. See the literature cited in
7. Michael L. Ross, "Does Oil Hinder Democracy?" World Politics 53. 3 (2001): 325-61
8. Nathan Jensen and Leonard Wantchekon, "Resource Wealth and Political Regimes in Africa," Comparative Political Studies 37 (2004): 816-41
9. On resources and civil conflict see
10. Paul Collier and Anke Hoeffler, "On Economic Causes of Civil War," Oxford Economic Papers 50 (1998): 563-73
11. "Greed and Grievance in Civil War," Oxford Economic Papers 56 (2004): 563-95
12. Michael L. Ross, "A Closer Look at Oil, Diamonds, and Civil War," Annual Review of Political Science 9 (2006): 265-300.
13. For example, Pol Pot supported the Khmer Rouge army by capturing a strip of Cambodian territory rich in rubies and sapphires; and Sassou of Congo-Brazzaville sold future drilling rights to a French oil company to support his private militia. See Michael L. Ross, "The Natural Resource Curse: How Wealth Can Make You Poor," in Natural Resources and Violent Conflict: Options and Actions, ed. Ian Bannon and Paul Collier (World Bank, 2003), pp. 1-37; and Ross, "Booty Futures," working paper (2005).
14. For example, the conflict in the Democratic Republic of Congo, 1998 to 2002, which caused approximately 3.3 million deaths.
15. Philippe Le Billon, "The Political Ecology of War: Natural Resources and Armed Conflicts," Political Geography 20 (2001): 561-84
16. See, for example, Oxfam, "Africa at the Crossroads," Oxfam Briefing Paper 19; Global Witness, The Sinews of War: Eliminating the Trade in Conflict Resources (London: Global Witness, 2006); UN Security Council Resolutions 1625 (2005) and 1653 (2006).
17. On resources and growth, see Jeffrey Sachs and Andrew Warner, "Natural Resource Abundance and Economic Growth," NBER Working Paper no. 5398 (1995);
18. Sachs and Warner, "The Curse of Natural Resources," European Economic Review 45 (2001): 827-38
19. Paul Collier and Anke Hoeffler, "Civil War," working paper (2005), p. 24.
20. Macartan Humphreys, Jeffrey Sachs, Joseph Stiglitz, "Introduction" to their edited volume Escaping the Resource Curse (New York: Columbia University Press, 2007): 1-20.
21. Michael L. Ross, Extractive Sectors and the Poor (New York: Oxfam America, 2001), p. 8.
22. Ross, Extractive Sectors and the Poor;
23. Thorvaldur Gylfason, "Natural Resources, Education, and Economic Development," European Economic Review 45. 6 (2001): 847-59.
24. Andrew Rosser, "The Political Economy of the Resource Curse: A Literature Survey," IDS Working Paper 268 (2006).
25. Xavier Sala-i-Martin and Arvind Subramanian, "Addressing the Natural Resource Curse: An Illustration from Nigeria," IMF Working Paper WP/03/139 (2003). The $1 per day figure is the World Bank 1993 PPP standard for extreme poverty.
26. In just four years in power Sani Abacha and his family embezzled around $3 billion from the state. Transparency International, "National Integrity Systems Country Study Report Nigeria" (2004), p. 13.
27. "Rape Epidemic Raises Trauma of Congo War," NewYork Times, October 7, 2007 (http://www.nytimes.com/2007/10/07/world/Africa/ 07congo.html?r=1&oref=slogin).
28. "Equatorial Guinea's 'God'," BBC News, 26 July 2003; U.S. State Department," Equatorial Guinea Country Report on Human Rights Practices (1998)."
29. CIA, World Factbook 2007, "Rank Order -GDP -per capita (PPP)."
30. "The Fortunes of Kings, Queens, and Dictators," Forbes, May 5, 2006; "With Friends Like These..." Washington Post, April 18, 2006, A18; Global Witness, "New U.S. Envoy to Equatorial Guinea Must Hold Government Accountable for Corruption and Human Rights Abuses," press release, March 8, 2006.
31. Freedom House, Freedom in the World, "Equatorial Guinea" (2006); U.S. State Department," Equatorial Guinea Country Report on Human Rights Practices (2006)."
32. "Playboy Waits for His African Throne," Sunday Times, September 3, 2006 (http://www.timesonline.co.uk/tol/news/world/ article626511.ece).
33. International Covenant on Civil and Political Rights, Article 1. The first article of the International Covenant on Economic, Social, and Cultural Rights is identical. Of the 192 UN member states, 151 (including the United States and all of the other G8 countries) have ratified one or both of these treaties. The nonratifiers are mostly small countries like Palau. In international law "a people" refers to all of the citizens of a country.
34. The Constitution of Iraq, Article 108. George W. Bush agrees with the Iraqi constitution on this point: "The oil belongs to the Iraqi people. It's their asset" ("President's Statement to the Press," June 12, 2006). Indeed world leaders from across the political spectrum have made analogous assertions: Hugo Chavez has stated that the Venezuelan people own Venezuela's oil (http://www.energybulletin.net/4656.html), and Ayatollah Ali Khamenei has said that the Iranian people own Iran's oil (http://www.globalsecurity.org/wmd/library/news/iran/2002/ 12-080402.html). (In this article "American" will be used to refer to the United States, with apologies to other North and South Americans.)
35. See, e.g., Angolan Law N. 13/78 (1989): "All deposits of liquid and gaseous hydrocarbons which exist underground or on the continental shelf within the national territory... belong to the Angolan People"; UN General Assembly Resolution 1803 (XVII) (1962) "Permanent Sovereignty over Natural Resources"; and the "Declaration on the Right to Development" adopted by the United Nations in 1986.
36. What the Reagan administration actually did in 1982 was to institute a series of public auctions for drilling leases in American coastal waters, putting the revenues from these auctions into the public purse. The wisdom of Reagan's auction policy was fiercely debated in Congress, but all sides of this debate assumed that whatever policy was adopted for the oil would have to be open to public scrutiny and discussion.
37. Although it carries no contemporary legal authority, some philosophers may hold to the idea that the earth in some way belongs to all humans equally. There are deeper theoretical issues here that we cannot take up, but simply as a practical matter global egalitarians have good reason to support the approach set out in this article. For global egalitarians will certainly condemn dictators and civil warriors seizing natural resources by force in underdeveloped countries. The approach here will push the highly unequal pattern of control over resources toward greater equality among individuals around the world, and so will make progress toward the global egalitarian ideal.
38. Thomas Pogge, "Recognized and Violated by International Law: The Human Rights of the Global Poor," Leiden Journal of International Law 18. 4 (2005): 717-45
39. Thomas Pogge, World Poverty and Human Rights (Cambridge: Polity Press, 2002), pp. 4-6.
40. The Westphalian system recognized the resource right not only in sovereign states, but also in invading armies and joint-stock companies that controlled significant territory within a state.
41. See Jack Donnelly, International Human Rights (Boulder, Colo.: Westview Press, 1998), pp. 26-28; Allen Buchanan, Justice, Legitimacy, and Self-Determination (Oxford: Oxford University Press, 2003), pp. 233-88.
42. In this article the term "regime" refers to groups within a territory that have coercive power over a significant proportion of that territory's population. The term applies both to officeholders of national governments and to leaders of rebellions during a civil war.
43. Oil industry global revenues in 2005 were $1.62 trillion, 81 percent of which went to the five "super-major"integrated oil companies. Congressional Research Service, "Oil Industry Profit Review 2005," RL33373 (2006), p. 5. For comparison, the U.S. GDP in 2005 was $12.46 trillion. The percentage of trade figure is from WTO, International Trade Statistics 2006, p. 119.
44. See, for example, the parallel legal framework based on the Alien Tort Claims Act in the case against UNOCAL for abetting human rights violations in Burma (Doe v. Unocal, 2003 WL 359787 [9th Cir.]). See also the private law strategies developed to limit the damage of borrowing by corrupt regimes in
45. Lee C. Buchheit, G. Mitu Gulati, and Robert B. Thompson, "The Dilemma of Odious Debts," Duke Law Journal 56. 5 (2007): 1201-61.
46. Here I summarize the U.S. Uniform Commercial Code, which is (because of the position of the United States in global trade) one dominant model. Commercial law in other developed countries has slightly different patterns, but not in ways that will affect the outcome of the argument here.
47. The vendor may be vulnerable to any number of civil and criminal penalties, including penalties for fraud or robbery.
48. An analogy from Simmons: A chairman could not claim even tacit consent from his board members if he finished his proposal by saying: "Anyone with an objection to my proposal will kindly so indicate by lopping off their arm at the elbow." A. John Simmons, Moral Principles and Political Obligations (Princeton, N.J.: Princeton University Press, 1979), p. 81.
49. Barring exceptional circumstances, a regime may not argue that, although it lacks the people's consent, it is selling the country's resources in the people's interests. An appeal to the owner's interests is no defense to the charge of selling the owner's property without the owner's permission (as any everyday example will show). The only possible exception concerns incompetent owners, whose property may be managed by an authorized agent. What if some regime then attempted to declare itself to be the selling agent of an incompetent principal, claiming that the country's citizens were too simple-minded, or too divided by ethnic antagonisms, or too exhausted by the demands of daily survival to come to a collective decision about the territory's resources? For such claims to ground a credible declaration of agency, this regime could not itself be responsible for the people's incompetence: For keeping the population uneducated or divided or impoverished. Moreover, even if the regime's declaration were credible, this regime would be jumping out of the frying pan of property law into the fire of the law of agency (see American Law Institute, Restatement [Second]of Agency [1958], §39: 130; §165: 389-92; Restatement [Third]of Agency [2006], §2.03d). Agents of incompetent principals are bound by the most stringent duties in all of equity. These strict-liability duties leave no room whatsoever for the diversion of revenues that is typical of regimes in resource-rich countries. A president who is receiving hundreds of millions of dollars from oil sales while most of his people live on a dollar a day cannot be a credible agent of an incompetent principal. No corporation that should suspect that a regime lacks legitimate agency can sign contracts with it in good faith.
50. Speech of George W. Bush, March 14, 2002.
51. Cynthia McClintock and James Lebovic, "Correlates of Levels of Democracy in Latin America During the 1990s," Latin American Politics & Society 48. 2 (2006): 29-59
52. Department of State and U.S. Agency for International Development,"FY 2007 Joint Performance Summary, Strategic Goal 7: Democracy and Human Rights" (2007). The use of the Freedom House ratings by the U.S. government gives these ratings as much standing as they could have (short of being incorporated into legislation), and is sufficient to ground judgments in U.S. courts. Although U.S. courts are not strictly bound to use these ratings, any court that requests supporting evidence can also be furnished with ratings from related indices such as the World Bank's Worldwide Governance Indicators, the Bertelsmann Transformations Index, Transparency International's Corruption Perceptions Index, and so on. These indices reinforce each other's results, which also means that compelling evidence can be presented to courts even in countries where no index is in official use. The legal framework set out here could thus be translated, for example, into European courts as well.
53. Freedom House, Freedom in the World 2008.
54. The Freedom House ratings indicate the level and not the cause of a lack of basic freedoms within a country, so they register civil conflict and failed states as well as repression by a national government. This can be seen from the low ratings of countries like Sudan and Congo. In these places the ratings show that there is no political actor (government or rebel) that can claim to be representing the whole people of that country.
55. Citizens from a resource-cursed country can have the standing to bring civil suits in U.S. courts: A government in exile would be ideal; an opposition movement or even a group of concerned citizens could also be granted standing. Upon finding for the plaintiffs in a civil case, a court should place the money reclaimed into a Clean Hands Trust for the people of the country, as described below.
56. For example, the Westphalian "act of state" doctrine requires courts not to review acts of a foreign government. The status of this doctrine has declined in U.S. law, especially in property cases;
57. Anne-Marie Burley [Slaughter], "Law Among Liberal States: Liberal Internationalism and the Act of State Doctrine," Columbia Law Review 97 (1992): 1907-96
58. For example, in civil law, in addition to the UNOCAL case cited above, a New York court has recently upheld a plaintiff's right to bring action under the Alien Tort Claims Act regarding Shell's activities in Nigeria (WIWA v. Royal Dutch Petroleum Co. & Shell Transport and Trading Co., WL 319887 [S.D.N.Y. 2002]). See also the opinion in Kensington v. BNP Parnibas, 05 Civ. 5101 (LAP) (S.D.N.Y. 2005), alleging conspiracy under the civil RICO statute by corrupt officials of the Republic of Congo to misappropriate resources, including oil, from the country. In the criminal law, the National Stolen Property Act (18 USC 2314) criminalizes importation of goods when the defendant acts "knowing the same to have been stolen, converted, or taken by fraud"(see United States v. Schultz, 178 F. Supp. 2d 445, 449 [S.D.N.Y. 2002]); and the Federal statute concerning receipt of stolen goods (18 USC 662) has explicit extraterritorial jurisdiction (see Congressional Research Service, "Extraterritorial Application of American Criminal Law,"94-166 A [2006]).
59. Sudan's civil conflict, which has flared up repeatedly since the 1980s, pits the Muslim Arab regime in Khartoum against the Christian and animist African tribes. Since the beginning of serious oil production in 1999 the regime has received about $500 million a year from petroleum sales, and has spent much of this money on arms that human rights groups say have been used to attack civilians in the south and the west (Darfur). China is a major investor in the Sudanese oil industry, and China currently meets 7 percent of its total energy demand with oil from Sudan. "Hu's Trip to Sudan Tests China-Africa Ties," Christian Science Monitor, February 2, 2007.
60. Trade economics says that the tariffs may have to collect total revenues greater than $3 billion in order to ensure that it is the Chinese (and not American consumers) who end up contributing $3 billion to the trust. Still, when the antitheft tariffs are in place, shoppers in the United States will have to pay slightly higher prices for some Chinese imports. Yet this is the cost of engaging in legitimate trade: consumers must always pay higher prices when they buy legal merchandise. Shoppers will always have to pay more, for example, to buy a watch from a department store than they would to buy the same watch from a black market dealer on the street.
61. The trust-and-tariff policy can be seen as an enforcement mechanism for Nozick's third basic principle for the legitimacy of capitalist holdings: The principle of rectification of injustice. Robert Nozick, Anarchy, State, and Utopia (New York: Basic Books, 1974), pp. 152-53.
62. Chinese export of commodities produced with Sudanese oil would not be trade, but rather to that extent the passing of stolen goods. Since the antitheft tariffs are aimed at the illegal component of these exports, these tariffs are not restrictions on trade, but mechanisms to enforce property rights. Therefore the World Trade Organization should not allow China to impose trade restrictions in retaliation for the antitheft tariffs. The Chinese could no more protest these antitheft tariffs in the WTO than they could protest sanctions were they to occupy Sudan militarily and sell off its oil (or, more realistically, were they to invade Taiwan and export its iron). The antitheft tariffs should be at least as nonretaliable under WTO rules as would have been the 1986 U.S. import bans against the apartheid South African regime, or the 1990 UN Security Council sanctions against Iraq after its invasion of Kuwait.
63. American banks must transfer the funds from the trust to the Sudanese, plus interest. They may claim a reasonable fee for their trusteeship.
64. See Nozick, Anarchy, State, and Utopia, p. ix.