Oil windfalls: blessing or curse?

Abstract

The oil booms of 1973 and 1979 brought unprecedented income to many, previously poor oil-producing countries. What became of their new-found wealth? In this comparative study, the author assesses for the first time, the effects of oil windfalls on six developing countries. He presents new information on how these petroleum exporters, used their oil revenue, and analyzes the consequences of government policies. He concludes that much of the potential benefit of the windfalls, has been dissipated, and, explains why some oil producers may have ended up actually worse off, despite the additional revenue. Although this issue has been previously discussed, especially anecdotally, it has not been systematically analyzed, and related to the economic policies of particular countries, and their macroeconomic characteristics. In this comparative analysis of six oil-exporting countries - the core of the book - the author blends institutional, and political aspects, with the quantitative results derived from a complex economic model, including individual country studies. The author suggests that natural resources alone will do little to promote economic development. Countries need sound economic management, and need to address the political factors that conflict with wise policy choices. Market processes are needed to help allocate public resources, and, governments and others responsible must take account of risk, and uncertainty when selecting projects, and formulating plans for development.