Testing the neocon agenda : Democracy in resource-rich societies

Abstract

Many resource-rich countries have suffered from the ‘resource curse’: the failure to harness commodity revenues for sustained growth. In this chapter we investigate analytically and empirically whether this curse is ameliorated by democracy. The question is at the intersection of two large and active literatures, one accounting for the resource curse and the other investigating the economic consequences of democracy. On the intersection, however, there is to date very little. Yet the intersection is of considerable practical concern. The recent rise in commodity prices has generated revenue booms in commodity exporters that were last experienced in the 1970s. The widespread failure to harness those booms for sustained growth is the empirical basis for the resource curse: hence, whether the present booms will repeat history is of first order importance for a large group of low-income societies. Between the two resource booms one striking institutional change has occurred: resource-rich countries are now on average more democratic. The importance of institutions and the scope for changing them are now central controversies in development economics. Thus, our investigation of the economic consequences of democratization in resource-rich countries nests within this larger debate.