At Hit & Run, Ron Bailey expresses a surprisingly confident explanation of Arab countries’ economic and political woes: oil. Yes, the resource curse is back in the news. But as longtime readers of Pileus know, recent research suggests that the resource curse may be a myth. To the extent that oil wealth explains poor economic performance, it only seems to do so contingent on other factors, such as the ownership of the resources. State oil companies are notorious failures, while private ownership of the means of extraction is associated with better growth.
Bailey points out that Saudi Arabia’s GDP is lower today than it was in 1981. True enough. But it doesn’t follow that oil has hurt Saudi Arabia’s economy. Oil prices were very high in 1981 but declined substantially in 2009 and 2010. Of course petrostates have lower GDP when oil prices are low. Just think about it for a moment: if Saudi Arabia had no oil, would it be even half as wealthy as it is? Of course not! Oil is no economic curse to Saudi Arabia. But might it be a political curse? Again, once the counterfactual is properly conceptualized, it seems unlikely. If Saudi Arabia were simply just another low-income, intensely religious country in southwest Asia, the predicted probability that the country would be democratic or at all liberal (in the Freedom House sense) would be tiny.