A Travel Guide to The Paradox of Plenty

Untapped: The Scramble for Africa’s Oil by John Ghazvinian
John Ghazvinian’s Untapped: The Scramble for Africa’s Oil is about the resource curse in Africa. Although Ghazvinian ends on a somewhat optimistic note, his thesis can be distilled to the following: the resource curse exists in Africa. It has already shown its damage in Nigeria, Gabon, the Republic of Congo, and (to a lesser extent) Angola, and the future does not bode well for emerging Afro-petrostates.

Ghazvinian is a journalist, but he does a solid job explaining of the resource curse and describing the political history of the nations he visits. At times though, his writing seemed too journalistic—snarky and informal.

His writing is a travel book of land I want to visit, and a history of states I crave to learn more about. What’s more, it is a contemporary affairs piece dealing with issues (Equatorial Guinea’s history, deep water drilling, etc.) I have found nowhere else.

Summary
Ghazvinian spends the bulk of the book in the four African nations that are already established oil-states: Nigeria, Gabon, the Republic of Congo, and Angola.

All of these states have had similar post-oil-discovery histories (except perhaps Angola—which I believe does not deserve to be lumped into this group): ubiquitous corruption, government instability, insurrection in oil rich provinces, and—of course—stagnant or declining economies.

Nigeria, the grandfather of the oil states, has the most notorious oil history of the four. Nigeria is the leading oil producer in sub-Saharan Africa, yet its oil reserves have brought mostly corruption and instability rather than economic development. Its oil-producing regions are seemingly in a state of perpetual violence. Successive military regimes (which finally ended in the late 1990s) squashed any nationalist, human rights, or environmental movements that emerged. And after the fall of this repressive regime, stability and development have remained fleeting goals.

One of the big cruxes of Nigeria’s instability is the issue of resource control. The many ethnic groups of Nigeria’s oil producing Niger Delta demand greater resource control. After all, it is their communities whose livelihoods have been most disrupted by drilling. They’ve suffered the brunt of oil spills and exploitative contracts; and perhaps worst of all they’ve seen incredible wealth pumped out of their soil and far from their pockets. They feel entitled to some of this wealth and they are frustrated that oil has destabilized, rather than enriched them. And in turn, they’ve become obsessed with “getting a piece of the pie” even if it’s to the detriment of their own community and environment. In Niger Delta communities, the position of traditional chief has often become a battleground between self-interested individuals. And some of the most frustrated have resorted to destroying pipelines to collect the rewards given for oil spills. The government and profiting oil companies have not built the infrastructure that these struggling communities need and demand, and this further radicalizes and corrupts all involved.

And parallel to the oil and natural gas extraction done by multinational oil companies, highly organized, illicit oil and natural gas cartels have emerged. “Illegal bunkering”—the stealing of crude oil by sawing and drilling into existing pipelines—has become an enormous operation run by well-connected elites with some shadowy government links. And even more absolutely insane is the practice of “local bunkering”—stealing natural gas by drilling holes in underwater gas pipelines. This, in contrast to “illegal bunkering,” is sort of the everyman’s corruption. It is smaller in scale, with higher risk and lower reward. The process itself is so incredible, I have to quote it:

Enterprising youth had discovered the Shell gas pipeline going through Oluasiri, laid deep at the bottom of the riverbed. They had hired teams of divers to drill holes at three different points along the gas pipeline and attach hoses to the boreholes. Where the hoses came up to the surface, valves had been attached to control the flow of gas coming from the pipeline. The product that comes out of those valves is a volatile substance that is not quite crude oil and not quite kerosene (which is what crude turns into when the gas has been distilled out of it), but something in between that still has a lot of gas in it. The bunkerers let it sit for two or three days until it turns into kerosene, which is then sold to villagers for use as a cooking fuel. This bootleg kerosene is not as pure as what is sold legally, and when people put it in their stoves, it can explode and kill them. But it costs a fraction of what it otherwise would, and provides a handsome income for the unemployed youths of the area. (Pp. 48-49)

So in sum, a nation with great resource wealth is likely to be as poor (if not poorer)—and far more unstable—than most other sub-Saharan African nations. This is the paradox of plenty, and Ghazvinian has this story on repeat throughout much of the rest of the book. He alters it to each local context put his analysis and conclusions remain the same.

The Resource Curse
Before continuing on to summarize some of the other nations along Ghazvinian’s Paradox-of-Plenty tour, I want to concisely explain why the resource curse is a curse. After all, it’s a pretty counter-intuitive; having resource wealth should be an engine for growth. Describing the resource curse seems like a rich kid lamenting a free car. But it ain’t. Here goes.

In developing countries (with small economies and weak governments), having an abundance of one commodity (copper, lithium, diamonds, and yes, oil) is a political and economic curse. It is economically ruinous because it engenders “Dutch Disease” whereby all efforts to diversify oil wealth and build other sectors of the economy hit almost insurmountable impediments. Pumping oil out of the ground, pumps large amounts of foreign currency in to the nation. A seemingly good thing. This infusion of foreign currency, however, strengthens the local currency. This may seem like a good thing, but a stronger currency makes it difficult to develop other sectors of the economy.

With a stronger currency, it becomes more expensive to grow crops or produce manufactured goods. Everything that goes into an economic sector costs more. Labor and all the parts that enable a plant to grow or a machine part to be built cost more. All of a sudden a poor developing nation cannot produce its crops and its goods as cheaply, and thus are unable to export their products and further grow. As Naim writes, it’s not that these leaders fail to recognize that its necessary to diversity their economies, it’s that “the exchange rate stunts” other sectors of the economy. Additionally, oil and other extractive industries create few jobs, and their roller-coaster prices make macro-economic planning difficult.

And the curse is political ruinous because it breeds corruption. It turns the nation into a rentier state whereby the government becomes a source of wealth—a gold mine that is to be raided—rather than an engine for growth. Constituents are taxed less, which essentially makes them care less about government corruption, and an unending tap of wealth allows governments to buy off or repress dissidence. According to Naim, oil rich nations spend between 2 and 10 times more on their military than non-oil producing nations. Thus oil militarizes the state and spread a culture of conflict.

The most frustrating part of the resource curse is that it only damns developing nations. “Countries that have institutional strength need not worry” (Naim). Thus, nations like the US and Norway can use their resource wealth to enhance their economic growth. Yet, nations without institutional strength—a diverse economy and a political organization that can ensure that oil does not go into the coffers of a few politicians—languish under the curse. Again this is the most frustrating part. The general consensus is that developing nations need strong institutions in order to fend off the curse, and yet the curse ensures that it will be very difficult to develop strong institutions.

(Note: Foreign Policy’s Editor Moises Naim does a good job of succinctly summarizing the curse.)

Summary Part II
Although the overall story remains pretty much the same for each of the nations that Ghazvinian travels to, I still found the content of the book interesting. It’s chalked full of historical facts and journalistic descriptions that give depth and uniqueness to the seemingly repetitive subject matter (poverty → oil → greed & violence → greater poverty).

Ghazvinian’s travels in each further support his argument that oil has been a curse. Visiting Gabon, he describes Libreville (its capital) as a city of extreme wealth with majestic government buildings—akin to the “French Riviera” (98). And in contrast to the exorbitant governmental wealth, he offers perhaps the best example of the “Dutch Disease” I’ve read; banana-rich Gabon has its ripened fruit fall off trees and rot uneaten. Despite the abundance of uncultivated bananas, an undeveloped agricultural sector means that Gabon is reliant on Cameroon for bananas and must import most of its food—a sad reality for a fertile nation. He describes Omar Bongo and the mismanagement and wastefulness that went on under his rule; the 400-mile Trans-Gabonais railway that cost far too much to build and the title for highest per capita champagne consumption that Gabon captured in 1984. Most interestingly, he asks the question, what will happen to Afro petrostates when the oil runs out, as Gabon’s oil output has been steadily declining since 1997.

He also travels to the Brazzaville, which from his description sounds like a ghost town, in a nation where oil is inescapable. 90 to 95 percent of the nation’s export revenue comes from oil, and fighting to control this source of wealth and power has contributed to civil wars that spanned the 1990s and early 2000s. What’s more, in the Republic of Congo he describes a defeated civil society—a church-led dissident movement that has met strong repression.

In contrast, his travels in Angola seem like an anomaly—an outlier to the group of states that seem irreparably damaged by the resource curse. I was amazed to read about Lusaka and its astounding growth as a result of oil: the ritzy glass hotel and office towers going up over night, and the “overpriced and overbooked” (129) flights from JFK, Houston, and London to the booming city.

Angola is one of the few nations in sub-Saharan Africa that has never been reliant on foreign aid, and over the past decade the lusophone nation has had up astounding economic growth. In 2006, Angola’s GDP grew nearly 20%, and in 2008, Angola had the fourth highest growth rate in the world (CIA World Factbook). The only states that enjoyed greater growth were Qatar, Bhutan, and Macau, which have a combined population that is less than one-seventh of Angola’s.

This is not to say that there is not substantial poverty and social problems in Angola. Ghazvinian describes the decades long war between the MLPA and UNITA, which was both a civil war between Angolans and a proxy war between East and West, Marxism and Capitalism. He also describes, with patience, the debates about governmental and corporate transparency in Angola; where the international community continues to pressure major oil companies (or the Angolan government) to disclose how much money is coming out of the oil, and where this money is going. These are significant obstacles that Angola must over come, and in her recent visit Hillary Clinton voiced some of the contemporary political problems that Angola faces. Yet in his descriptions of Angola, the resource curse seems like much less of a curse. The boom is still so great and optimism continues to swell.

As with much of Africa’s oil, Angola’s oil has come from the waters off its shores (129). I was amazed to read about the so-called “Deep Water Revolution” Ghazvinian describes; where in the past couple decades, oil companies have begun exploring and extracting more and more from the deep depths of the ocean. Oil companies are now capable of drilling at depths of 7 and 8,000 feet, and as deepwater drilling technology develops, depths of over 10,000 feet will become possible. That’s 2 miles! What’s more there’s a ton of oil at these depths. Ghazvinian quotes two renowned oil consultants that predict that deepwater reservoirs contain more than twice the amount of oil already discovered on earth (85). That’s astounding, and although Africa may not hold a monopoly of these reservoirs, the continent sure holds a lot of them. As the continents were forming, and South America separated from Africa, a great deal of sediment and fossils fell off the African coast and into the Gulf of Guinea. That is one reason why today, the Gulf of Guinea holds substantial oil reserves.

I find it incredible that a nation can gain extraordinary wealth from a resource that most people in the host nation will never even see. A government can commission a large oil company to drill for oil 100-miles from its coast, and then ship it to another nation to be refined—thus never having to touch the land of the host nation. I also find it bizarre that a nation can own parcels of ocean—especially deep sea areas far from the coast. (Perhaps this is why the ocean between Nigeria and Sao Tome and Principe had to be negotiated before deep water drilling began.) I mean who feels a closeness or an affinity to a piece of ocean that you can’t even see from the coast? I’ve never stood on the beach of Robert Moses State Park, gazing longingly out to sea, thinking, “That’s America, that’s our land.” So I’m amazed that something so distant from a people can set them on a completely different macroeconomic course. It’s like hitting the lottery…a cursed lottery.


Wrapping all this up: Further Thoughts
Untapped is meant to serve as a warning and a lamentation for new oil states in Africa. Ghazvinian writes:

Nigeria, Angola, Gabon and Congo-Brazzaville, along with, to a lesser extent, Cameroon, make up an old boys’ club of African oil exporters…[Beginning in the early 1990s] Four African countries—Equatorial Guinea, Chad, Sao Tome and Principe, and Mauritania—have joined (or are about to join) the ranks of the world’s oil-producing nations, and several more—including Mozambique, Madagascar, Uganda, Kenya and Ethiopia—seem likely to follow. Another dozen appear more doubtful, but their leaders are crossing their fingers (166).

But is there anything that these nations can do to avert the curse? Or at least to mitigate the political and economic regression it causes?

Promoting transparency, strong economic planning (to overcome “Dutch Disease), and building institutional strength can help.

Equatorial Guinea—a truly unique African nation—makes the reader skeptical. The nation was formed when the Portuguese gave the Spanish a small tract of land on the West African coast, and a small island in the Gulf of Guinea. As the only former Spanish colony in Africa, this nation has perhaps the most bizarre and depressing history of any of the new oil states. Its wealth has been squandered. It has one of the most restrictive police states, yet has resort-like compounds for oil company employees. And most strangely of all, the existing government almost feel at the hands of a group of mercenaries hired by shady international businessmen. The warped political events of the past two decades, do not offer much hope to overcoming the resource curse.

Additionally depressing is the fact that Jeffrey Sachs and the World Bank have tried their hand at defeating the resource curse.

In Chad, the World Bank essentially set the nation’s economic policy, forcing the government to put substantial amounts of its profits in foreign banks and requiring all spending to be approved by civil society organizations. This failed (largely because the plan was never fully implemented). And in Sao Tome, the government brought in Jeffrey Sachs and his team of graduate students to help them write Sao Tome’s “Oil Revenue Management Law” (241). Time will tell how this transparency-promoting legislation fares.

It’s depressing that Western experts and institutions have struggled to help oil-rich nations to solve the resource curse. But what’s even more depressing is that national governments have become exasperated to the point that they’ve turned to distant outsiders like American professors and their grad students.

Yet, I don’t think the resource curse is as damning as Ghazvinian’s doomsday tour makes it out to be. I disagree with his fatalistic conclusion upon leaving Gabon: “Stories about Gabon in the international press are virtually nonexistent and, sadly, in a continent of plagues and famines, wars and genocides, this splendid anonymity, this tacit acknowledgement that nothing much ever happens here, is probably as close as Africa gets to a real success story” (116-7).

I don’t know if developing nations that lack the political and economic strength to handle a mass infusion of oil wealth can overcome the resource curse. But I don’t think the future of Africa does not have to be defined by the resource curse.

Nonetheless, Untapped serves as an important and relevant warning for African nations.