Over the past generation, academics and activists have marshaled an impressive array of theory, evidence, and ethical arguments tied to the claim that societies that receive large amounts of income from the sale of oil and natural gas suffer a “resource curse.” Income from those sources is easier to hide from the citizenry, enabling corruption and centralization of control; is less likely to be subject to popular oversight, weakening the development of democratic checks on official abuses; and crowds out other forms of government funding and private activity, leaving states addicted to the revenue stream with few alternatives. This curse is held to explain why autocratic resource-rich regimes, among other ills, are less likely to make a transition to democracy, more likely to initiate wars, and exhibit greater gender inequalities.

Victor Menaldo has long been skeptical of these claims. In a series of articles (most prominently with coauthors Stephen Haber and Michael Albertus), Menaldo has studied the logic underpinning them. He argues that the evidence for the curse is much less sound than it appears. The longer the time series one draws upon or the more specific the measurement for states’ fiscal reliance one employs, Menaldo argues, the weaker the existence of a curse seems to become. Indeed, for at least some states in at least some times, he posits that there exists stronger evidence for a resource blessing, in which the benefits of wealth from developing resources have assisted countries in climbing up the value-added ladder and establishing more stable state institutions.

In The Institutions Curse, Menaldo wraps these claims into a lengthy, dense, and powerfully argued book seeking to establish that the resource-curse literature has its causal arrow reversed. “Resource reliance is not an unmediated result of oil and minerals that fall like manna from heaven,” Menaldo writes in his conclusion. “It is instead endogenous to weak states with low-quality institutions . . . that attract capital to natural-resource sectors and incentivize the exploration and production of oil and minerals, as well as its taxation and exportation” (pp. 349–50).

As the book title suggests, the source of the association of high oil and gas rents with nasty political outcomes is located not in the properties of the commodities being exported but, rather, in the institutions existing in today’s resource-reliant countries before they began extracting hydrocarbons. Menaldo argues that “weak states with low-quality institutions”—those that cannot guarantee property rights or credibly commit to good governance—“cannot curate vibrant and diversified economies, because they fail to provide incentives that encourage broad physical and capital investments, specialization, and exchange” (p. 11).

For rulers of such countries, natural resource exploitation offers the promise of substantial returns without costly investments or risky reforms. Consequently, states with weaker institutions are likelier to engage in resource extraction in the first place, producing a strong—but spurious—cross-national correlation between political institutions and resource extraction. Over time, these associations have grown only larger, Menaldo argues, as rich countries, finding domestic hydrocarbon extraction too dangerous, costly, or environmentally unfriendly, have tightened regulations over their extractive industries, making exploration in poorer states relatively more attractive for international oil companies.

This story differs in its emphasis from the view of rentier politics enshrined in canonical resource-curse works. Advocates of the curse paradigm view the contract between ruler and ruled as central to the development of good institutions; for them, the American Revolution-era slogan of “no taxation without representation” can be generalized into “no taxation, no representation” in regimes under which there is no taxation, thanks to resource revenues. Menaldo instead proceeds from what he terms a “neo-mercantilist” approach, which begins from the observation that some rulers cannot generate adequate revenues through regular (that is, voluntary) taxation of their publics. That failure may come about because of a weakness of state capacity, illegitimacy, or simple poverty. Whatever its etiology, resource income offers a way for rulers to establish a straightforward and easily monitored revenue source that can help them build institutions to extend and deepen their rule.

These observations, Menaldo argues, explain why resource-rich autocratic regimes turn to hydrocarbon extraction even when other growth paths might be more beneficial in the long term. Dictatorships frequently deviate from the geologically optimal extraction path for oil wells, for instance, explicitly reducing permanent income in favor of immediate gains. More subtly, rulers of weak states have favored international investments in extractive industries, even though this does nothing to produce spillover effects in labor and capital productivity, because they offer much more easily captured revenue streams. Thus, instead of producing the potential for new rivals to contest incumbents’ power, they offer subsidies to help the rulers keep their control.

Menaldo’s largest challenge is causal inference. He must establish how we could know if state weakness preceded the extraction of resources, as he claims, and as the conventional view would reject. To do that, he blends narrative and empirical historical data, seeking to identify whether oil-rich states already displayed evidence of their putative curse before embarking on a resource-dependent path. Narratively, he displays an impressive range of case evidence, including a step-by-step discussion of Azerbaijan’s choice for resource dependence in the post-Soviet era and an impressive command of Latin American and U.S. political and oil-industries’ histories, as well as those of Arab monarchies (among other cases). His quantitative studies are even more impressive, as he casts back decades or even centuries to avoid the endogeneity problems that earlier studies fell prey to, as he has persuasively shown.

In studies of Latin America and the Middle East, Menaldo goes even further. He argues that there is substantial evidence of a resource blessing in Latin America: that as countries recovered from the transition out of imperial rule, resource-extractive industries offered a means to build state capacity and cement (more) stable institutions than would otherwise have been available. In the Middle East, Menaldo traces the origins of monarchical regimes in the Arabian Gulf to show how long-standing political cultures, not just oil, helped make such regimes more stable in the face of the Arab Spring of 2011. Such monarchical exceptionalism, of course, also buttresses the author’s claims about the central role of institutions, not resources, in driving the correlations uncovered by the resource-curse theorists.

The book is not perfect. It downplays the role of imperialism and colonialism in shaping the political cultures of resource-rich (and resource-consuming) societies. There is little role for time-varying or other heterogenous effects for resource income in the theory. The book’s macro-level focus is appropriate for testing the broad claims made by contending structuralist theories, but it overlooks potential mechanisms that could produce curses (or blessings) in shorter time frames. And in common with much of the work on this topic (including my own), Menaldo’s impressive statistical work proceeds from an assumption that states are independent units of the kind required by the assumptions underpinning those models. There is some reason to suspect that policies and political institutions spread via diffusion, emulation, coercion, and other processes that might qualify those assumptions. Indeed, it seems likely that at least some oil-rich countries’ observed outcomes cannot be compared to counterfactual non-oil scenarios since without oil revenues, those states would not exist in anything like their current form.

Despite these reservations, next to Michael Ross’s (2012) The Oil Curse, Menaldo’s book stands as the most important entry in discussions of the political dimensions of resource endowments’ effects on society. It should receive attention not only from specialists in the field, who must grapple with its arguments and evidence regardless of which side of the debate their sympathies fall on, but also from generalists, who may have heard more about one side of the debate than the other. Ambitious and provocative, The Institutions Curse will prove to be a landmark work.