“It is no coincidence that a breakthrough in unconventional hydrocarbons (i.e., shale oil, shale gas, oil sands, and coalbed methane) should have taken place in some of the most economically free countries of the world, such as the United States, Canada, and Australia. The combination of secure property rights, transparent and efficient regulation, a favorable tax regime, and minimal red tape made it possible.”
“One of the main obstacles to economic growth and social development in many resource economies is rent-seeking. It is not a unique feature of resource economies, but it does appear to have a particularly strong effect on them and to produce institutional weaknesses.”
– Peter Kaznacheev, Curse or Blessing? How Institutions Determine Success in Resource-Rich Economies, Cato Policy Analysis No. 808 (January 11, 2017)
This new study by Peter Kaznacheev, who is Senior Research Fellow at the Russian Presidential Academy of National Economy and Public Administration (RANEPA) in Moscow, valuably interprets mineral resource theory in light of institutions (read: market versus government control). In market settings (as in Texas, and as much of the US), private property rights and rule-of-law free markets create private wealth and direct such private wealth to the social good (“as if led by an invisible hand”).
This post is taken verbatim from Curse or Blessing? How Institutions Determine Success in Resource-Rich Economies with permission from the Cato Institute.
This paper argues that resource economies with better economic and political institutions manage their resource revenues better and can achieve superior results in economic growth and social development. Evidence presented here is at odds with the resource-curse hypothesis and with the idea that mineral-exporting countries are doomed to stagnation.
Instead of battling with various “curses” and “diseases,” governments might do a better job by looking inward and analyzing their own performance, along with the institutional conditions in the economies that they govern. It is the quality of institutions that essentially determines whether natural resource abundance is a blessing or a curse.
This paper reaches the following main conclusions:
Peter Kaznacheev (PhD) is Senior Research Fellow at the Russian Presidential Academy of National Economy and Public Administration (RANEPA) in Moscow, where he teaches about public administration in resource economies. Previously, he worked as Business Development Advisor, British Petroleum (BP) where he focused on new business origination and project evaluation in exploration and production.
Between 2002 and 2005, he was Senior Advisor, Russian Presidential Administration, dealing with economic, energy, and environmental issues. Prior to that he worked at the Multilateral Investment Guarantee Agency of the World Bank in Washington; and before that (1999–2000) as Advisor to the Deputy Chairman of the Committee on Property of the Russian Parliament.
As founder of Khaznah Strategies, a UK-based consulting firm, he advises companies and government agencies on various natural resources projects. He received a Master’s degree in international economics from the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, DC; and a Bachelor’s degree and a PhD in political philosophy from Moscow State University. Since 2006, he has been teaching a course at RANEPA focusing on public administration in resource economies.