Freeman Spogli Institute for International Studies Program on Energy and Sustainable Development Stanford University


Publications




Oil-Led Development: Social, Political, and Economic Consequences

Working Paper

Author
Terry L. Karl - Stanford University

Issued by
CDDRL Working Papers, page(s): 36
January 2007


Proponents of oil-led development believe that countries lucky enough to have "black gold" can base their development on this resource. They point to the potential benefits from enhanced economic growth and the creation of jobs, increased government revenues to finance poverty alleviation, the transfer of technology, the improvement of infrastructure and the encouragement of related industries. But the experience of almost all oil-exporting countries to date illustrates few of these benefits. To the contrary, the consequences of oil-led development tend to be negative, including slower than expected growth, barriers to economic diversification, poor social welfare performance, and high levels of poverty, inequality and unemployment. Furthermore, countries dependent on oil as their major resource for development are characterized by exceptionally poor governance and high corruption, a culture of rent-seeking, often devastating economic, health and environmental consequences at the local level, and high incidences of conflict

and war. In sum, countries that depend on oil for their livelihood eventually become among the most economically troubled, the most authoritarian, and the most conflict-ridden in the world.