The generalized resource curse
A useful way to understand the pickle we’re in, I think, is that we are suffering from the so-called “resource curse”. If you are unfamiliar with the phrase, “resource curse” refers to the regularity with which countries “blessed” with abundant natural resources end up as dystopian polities with dysfunctional economies. Nigeria has a lot of oil but no one wants to live there.
The resource curse is pretty easy to understand. It’s not associated with just any sort of natural resource. Switzerland has beautiful mountains and stuff that people would pay a lot of money for, but it is still well-governed. Accursed resources are of a very particular type. They are valuable tradable goods the extraction of which requires a small numbers of workers relative to the size of the economy as a whole. [*] Goods like this create a very strong tension between private property and social welfare. In the mythology of capitalist economics, “as if by an invisible hand”, the self-interested pursuit of private wealth promotes the general welfare precisely because we all require one another’s help. The butcher slaughters her beasts and the baker sugars his cakes, each with an eye to their own profit. But the butcher needs her carbs and the baker likes his meat, so the end result of their self-interested selling is mutual aid rather than mere accumulation.
This logic breaks down in an economy dominated by a valuable natural resource. Yes, the miners require meat and mead, but if they are small in number relative to the rest of the population, that won’t cost them very much. They are few mouths to feed, and the not-miners are many and lack bargaining power. What makes happy capitalism work, the silent tendon of the mythologized hand, is a kind of balance between individuals’ desire to accumulate and their need for the assistance of others. If there exists a very valuable natural resource, and if that resource can be privately controlled, there is no balance. Self-interested agents drop their butchering and bakering, and try to gain control of the resource. No magic force turns that into a positive sum game. Unless there are “very strong institutions” — whatever that might mean — the pursuit of wealth becomes a game with winners and losers. The invisible hand can manage no more than to lift a middle finger.
So far this is all very comfortable. Clucking about places like Nigeria is almost a reflex, a familiar tic among Western economists. But meanwhile, we’ve hardly noticed that technological and international supply-chain developments have snuck the resource curse in through our own back doors. In aggregate, the goods and services we require have grown ever more tradable, and production has grown ever more amenable to control by relatively small groups of people. There’s a sense in which we are all Nigerians now.
The result of a resource curse, even in Nigeria, is not a triumphant über-class gleefully enslaving those outside the circle of winners in the resource-control game. In human affairs, “legitimacy” matters, and the sources of legitimacy are time- and context-dependent. Nigeria has all the forms of modern government, a civil service many of whose members are no doubt idealistic and hard-working. What evolves is the situation we refer to as corruption, under which those who control the valuable resource create incentives within the institutions that confer legitimacy — government and finance, media and academia — in order to ensure continuation of their control. In doing so, lines are genuinely blurred and resources are genuinely shared. The work of mining and the work of governing cease to be distinct enterprises, they become a partnership in the common project of maintaining control over the special resources. And words with moral valence like “common” and “shared” are appropriate, because within the circle of insiders, that’s what it feels like. There is a “we” that includes all of those fortunate enough to be civilized, that includes “me” and “my family”, “my friends and my family and my coworkers”, “my school and my teachers”, everyone that most people in the civilized circle ever interact with. There are, at the edge of the circle, people who are genuinely brutal, the people who put down insurrections or directly manage low-bargaining-power chattel labor. But those are a small minority. Most people who work to perpetuate “corrupt, extractive” regimes are, in their own eyes, serving their communities. The more resource-curse logic binds, the more likely as a technological matter that control over economic value will be concentrated among a relatively small fraction of the society. This leads to a greater separation of circumstance, between winners who perceive themselves and their communities as “civilized”, and losers exhibiting social pathologies that may be more effect than cause of disadvantage, but are nevertheless real, and usefully assist in reinforcing the arrangement’s legitimacy. Corruption and idealism become impossibly fused. Did Timothy Geithner “save the world”, or did he perpetuate the stranglehold of a particular extractive elite? He did both. He saved his world.
There is a regularity here, an order. We find ourselves on the inside of social phenomena that we have seen before, that we can understand. The global economy is succumbing to a technologically-driven resource curse, coalescing into groups of insiders and outsiders and people fighting at the margins not to be left behind. Our governments are transforming themselves from mediators among widely dispersed and interdependent interests to organizations that maintain and police the boundaries between the civilized and the marginal, who put down the insurgencies and manage the pathologies of the latter so that they do not very much impinge upon the lives of the former. Our financial systems are mechanisms by which legitimacy is conferred upon facially absurd distributions of aggregate wealth, by virtue of processes that claim to be “voluntary”, “private-sector” and “market-disciplined”, but which are none of those things in any meaningful way.
There are lots of places to go with this analogy. “Resource curse” countries are traditionally small, open economies whose elites are less fettered in their neglect of domestic populations because they can trade resource wealth for most of what they want from foreigners. One might argue that the analogy is incoherent for large, mostly self-sufficient economies like the United States or the world as a whole, whose elites must rely on “domestic” production. But here the analogy between technology and trade, usually used to support the latter, comes in to condemn the former. The amenities for which Nigerian elites rely upon Europe, American elites may rely upon robots to produce, once the Chinese labor cycle runs its course. American, like Nigerian, elites will have their tailors and masseuses. But in a resource-curse economy, service providers at the boundary between inside and outside remain small in number relative to pathologized mass publics.
This analogy is not entirely hopeless. Alaska and Norway blunt the resource curse by proactively distributing the proceeds of resource extraction, limiting concentrated control and ensuing disorders. “Technology” is not a tangible thing that can be publicly owned and sold for proceeds. But like oil in the ground, it is a resource the scale of whose product far exceeds the reward required to incentivize its production. If we imagine technology as a source of value embedded in most goods and services, we can distribute claims upon it simply by distributing new purchasing power. A money-financed basic income would amount to a partial dispersion of technological bounty from those involved in concentrated production to “outsiders”. Like Norway’s Oil Fund, this might help preserve balance, economically and politically, in the face of our creeping resource curse.
[*] It’s probably more accurate, although depressing, to qualify this, and rewrite it as “a small numbers of workers capable of achieving bargaining power relative to the size of the economy as a whole.” Feudal economies, in which the majority of people work to produce agricultural goods, look a lot like resource-curse economies, even though numerical involvement in production is not concentrated. Bargaining power, defined as the ability to assert control over production, remains very unequal. If you define the resource curse this way, you end up with “cursedness” as the normal state of human affairs, and it becomes more sensible to talk about the “industrial age blessing”, a fleeting mix of social and technological conditions under which large numbers of workers contributed to production through processes that required scale and coordination. These circumstances allowed unusually broad segments of the population to organize and achieve bargaining power, increasing the scope of economic prosperity and the impetus to mass production that economists eventually label “growth”.
- 29-Apr-2013, 7:30 p.m. PST: “
broadeningincreasing the scope of economic prosperity along withand the impetus to themass production that economists eventually label as‘growth'”