Book Evaluation: Pauline Jones Luong and Erika Weinthal. Oil is not a curse: ownership structure and institutions in Soviet successor states (New York: Cambridge University Press, 2010)
In the book Oil Is Not a Curse, the authors test their hypothesis about the underlying causal mechanisms for resource curse through congruence procedures, and conclude by proposing an edge-cutting argument: whoever owns and controls the mineral sector affects the emergence of fiscal regimes that vary in terms of their ability to constrain and enable the state. In other words, mineral-rich states are "cursed" not by their wealth but rather by the structure of ownership they choose to manage their mineral wealth. The authors view ownership structure over mineral resources as an intermediary cause of institutional weakness. The form of ownership structure adopted by a resource-rich country shapes incentives for subsequent institution building, affects the institutional outcome (particularly the fiscal regime), and hence “the prospects for building state capacity and achieving long-term economic growth.” (p.9). By resting their argument on two bases, 1) the absolute immunity to direct external interference in domestic decision-making process, and 2) leaders’ own consciousness when constituting policy, the book challenges traditional resource curse wisdom by asserting that the structure of resource ownership functions as a determining variable that directs the pattern of resource management and its eventual welfare in developing countries. This argument does have its scholarly merits, but nonetheless is not flawless.
Contributions: A new variable and A New Measurement
One of the book’s most significant contributions to scholarship is its discovery of ownership structure over resources as a variable. Conventional resource curse arguments have largely ignored the potential impact of ownership structure over mineral reserves because, as the authors point out, they assume that this does not vary across resource-rich states in the developing world and often conflates state ownership with control. The authors conceptualize ownership structure as “a set of relations between direct and indirect claimants to the precedes (or rents) from the exploitation of this natural resource.” (pp.10-11). Upon this, they point out that mineral-rich states are "cursed" not by their wealth but rather by the structure of ownership they choose to manage their mineral wealth.
A second contribution made by the book is its authors’ sharp observation of an erroneous analytical measurement in conventional wisdom. Traditionally, petroleum (and mineral) wealth is measured by exports as a percentage of total exports and government revenue. Once oil (or any other mineral) revenue exceeds 40 percent of either the country’s total exports or total government revenues, this country is deemed “resource rich.” The authors caution us against a problem of using this measure: the conflation of resource...