Resource Windfalls, Political Regimes and Political Stability

January 17, 2012

Looking at the historical experiences of specific countries it seems uncontroversial that an abundance of natural resources can shape political outcomes.  Yet, the mechanisms through which natural-resource abundance affects politics frustrate attempts to identify simple generalizations, with resource-rich countries displaying great variations in measures of autocracy and democracy, and political stability.  However, a new study by researchers at the National Bureau of Economic Research plots significant relationships between a sudden, positive shock in resources rents and the subsequent changes in the political atmosphere of the country.

  • In well-established democracies, sudden resource windfalls have no effect on changes in the political climate.
  • In well-entrenched autocracies, the same result was found that the ruling elite (assumed here to control revenues from national resources) changed little when they received unexpectedly large returns.
  • However, it is in poorly and moderately entrenched autocracies that the greatest change is seen, as the ruling elite respond to unexpected revenue gains by becoming more autocratic.

This final relationship is somewhat easy to explain, due largely to some of the simplifying assumptions of the model.  When revenues from natural resources increase, it provides both a motive and a means of becoming more autocratic within poorly entrenched autocracies.  The motive that it brings about is a higher expected level of prosperity for members of the ruling elite, as they are largely in control of the resource.  The means for greater autocracy are provided by the windfall: higher revenues allow for greater allocations to activities that block competition in elections and oppress opposition.

This same effect does not hold true in previously entrenched autocracies because they have already achieved a higher level of autocracy and control over electoral competition than other autocratic regimes.

Similarly, democracies do not respond to sudden windfalls by becoming more autocratic, largely due to the motivations of the ruling elite at the time.  Unlike most autocracies, democracies present numerous opportunities for economic prosperity outside of the ruling elite.  This weakens the drive by members to reinforce their position and fight to stay there.  Thus, though windfalls provide a means for autocratic measures, members of democratic ruling elites lack compelling motivation.

Source: Francesco Caselli and Andrea Tesei, "Resource Windfalls, Political Regimes, and Political Stability," National Bureau of Economic Research, November 2011.

For text:

http://www.nber.org/papers/w17601

For study:

http://www.nber.org/papers/w17601.pdf

 

Browse more articles on Government Issues