Israel’s Newfound Petroleum Wealth: A Critique of the “Resource Curse”

In 1999, a company in Israel did what no one thought could be done – it struck natural gas and lots of it. Since then, two of the largest offshore natural gas fields have been found in Israel’s waters, disproving the belief that Moses led the Jews to the only Middle Eastern country to not have petroleum. In 2011, it found what is believed to hold 250 billion barrels of shale oil – an amount that rivals the 260 billion barrels of crude oil in Saudi Arabia. Most economists argue, however, that this is not good news for Israel due to the “resource curse.” The concept claims that finding an abundant amount of natural resources actually harms the local economy, politics and society as a whole through means of abuse of power, manipulation and pure disregard for societal welfare. This usually is applied to small, poor and previously corrupt governments. Currently, Israel is in a good position to avoid the resource curse. It is a militarily and economically strong, democratic nation. It has many resources available to it as well as lessons from the past to help it avoid the turmoil that historically faces nations with newfound petroleum wealth. This paper argues that not only can Israel beat the resource curse, but that the concept of the resource curse itself is flawed. Through historical examples of Nigeria and Canada, it is proven that not only small and weak governments fall victim to the greed and temptation that follows new resource wealth. The United States and Norway will show that with correct policy response, governments can avoid the curse highlighting the fact that an avoidable “curse” is, in fact, no “curse” at all. Finally, this paper will outline the appropriate political response for Israel containing several policies that limit sector transfers and exports as well as outlines the establishment of two sovereign wealth funds. Israel, like others before, can avoid the resource curse and boost all parts of its economy by taking several intricate steps

Ghana and the Ideal of the Citizen-Shareholder: A Corporate-Law Response to the Resource Curse

This Note assesses Ghana’s legal regime for managing revenues from its newfound petroleum reserves as a means of combatting the resource curse—the well-documented political and economic phenomenon wherein resource-rich countries experience greater levels of corruption and poor governance and weaker democracy and economic growth than resource-poor nations. The Ghanaian regime fails to provide systemic protections against the resource curse by (1) supplying insufficient economic development and poverty relief, (2) lacking incentives and mechanisms for overseeing and holding accountable the powers responsible for managing petroleum revenues, and (3) providing insufficient channels for spreading the economic benefits of extraction beyond the petroleum sector. This Note undertakes a comparative study of a representative group of petroleum revenue-management regimes—those of Alaska, Norway, Indonesia, and Trinidad and Tobago—in search of an effective regime that might be transplanted to Ghana. Finding that none of these regimes are adequately applicable to Ghana’s economic, social, or political context, this Note goes on to propose a novel regime for petroleum revenue management in Ghana, drawing on principles of U.S. corporate law

What Have We Learned about the Resource Curse?

Since 2001, hundreds of academic studies have examined the “resource curse, ” meaning the claim that natural resource wealth tends to perversely affect a country’s governance. There is now robust evidence that one type of mineral wealth, petroleum, has at least three harmful effects: it tends to make authoritarian regimes more durable, to increase certain types of corruption, and to help trigger violent conflict in low and middle income countries. Scholars have also made progress toward understanding the mechanisms that lead to these outcomes, and the conditions that make them more likely. This essay reviews the evidence behind these claims, the debates over their validity, and some of the unresolved puzzles for future research.

On the new Kenyan sovereign wealth fund

Sovereign wealth funds (SWFs) have been established in several countries to manage the revenues arising from exhaustible natural resources. SWFs allow consumption to be spread between generations, and between periods of high and low natural resource prices. In this paper the arguments for and against establishing an SWF in Kenya are considered. A first section considers the argument that Kenya is too poor to allocate oil revenues to such a fund. A second section discusses the principles underlying such a fund. A final section concludes by considering the steps that are being taken to establish a Kenyan SWF

Resources, Rent-seeking, and Reform in Thailand and Myanmar (Burma): the Economics-Politics nexus

This article examines the economics-politics nexus in Thailand and Myanmar in the context of rent-seeking, revenues from oil and gas resources, and possible political reform