The Politics of Oil and Budgets #nlpoli

When any country or province depends heavily on the money that comes from resource extraction, it affects politics there.

Political scientist Michael Ross is probably the most recent author on the subject. Terry Karl has also written extensively on the resource curse.  She wrote of the best known books on the subject:  The paradox of plenty:  oil booms and petro-states.  You can also find some of Karl’s further thoughts on the issue in an article she wrote in 2007  and revised in 2009.

These studies focus on the developing world, for the most part, but what academics observe about those countries can cause you to think again about politics in other places.

Like say, Newfoundland and Labrador.

Nalcor’s Dark Secret #nlpoli

Since its creation, Nalcor has existed in a perpetual conflict of interest of one kind or another. 

SRBP raised the issue of conflict of interest 2006 when Dean Macdonald – then chair of Nalcor’s board – accepted an appointment to the board of a company Nalcor was doing or was planning to do business with.

Nalcor has been in another sort of conflict of interest in it acted as lead negotiator for the provincial government and as an oil company at the same time.  On the one hand its interest should be in maximising benefits to the province while on the other hand, its interest should be to lower costs in order to maximise corporate profits. The two things cannot exist side-by-side as the Hebron agreement demonstrates.

Again, SRBP pointed this out in 2006 when the Hebron talks fell apart and on several occasions subsequently.

Time hasn’t changed much.

Oil and Democracy #nlpoli #cdnpoli

Michael Ross contends there is a relationship between oil revenues and democracy.  Crudely put:  oil hinders democracy.

First, the oil-impedes-democracy claim is both valid and statistically robust; in other words, oil does hurt democracy. …

Second, the harmful influence of oil is not restricted to the Middle East. …

The third finding is that nonfuel mineral wealth also impedes democratization. …

Ross has a couple of simple tables comparing the relative reliance of some national economies on oil and non-fuel minerals.  in both cases you just calculate the export value of the minerals as a share of gross domestic product.

In 2011, the provincial GDP was $33 billion.  Of that, the province produced and exported about $10.7 billion in oil and $4.6 billion in non-fuel minerals.  That gives an Oil Reliance number of 32 and a Mineral Reliance number of 14.

To put that in perspective,  Ross’ calculation using 2006 figures for oil producing countries puts Newfoundland and Labrador on the same rank as Qatar and Saudi Arabia, both of which scored 33.85. It puts the province behind Brunei, Kuwait and Nigeria but miles beyond Libya (29.74), Iraq (23.48) and Venezuela (18.84)

Norway scored 13.46.

The Mineral Reliance score puts Newfoundland and Labrador at the fourth highest spot among the countries on Ross’ chart. Third place belongs to Bahrain (16.39), while fourth on the chart is occupied by Chile at 12.63.

Canada as a whole scored only 2.2.

Before you get too excited, the relationship between oil and democracy is a wee bit more complex, as Ross relates.  Let’s just look at those simple calculations first.  We’ll get back to the other ideas Ross discusses in his new book The Oil Curse.

-srbp-