There is an abundant literature on the relationship between the exploitation of abundant natural resources and development, and a vigorous debate concerning the supposed inevitability of perverse and conflictive consequences, such as poor-quality growth, inequality and conflict. In The Developmental Challenges of Mining and Oil, however, Rosemary Thorp and her colleagues set out to ‘understand the mechanisms linking natural resources to policy failure, as well as the historical context in which these mechanisms develop, and presumably mutate’ (p. 1). They aim to do so through an analysis of six case studies of countries historically dependent on the exploitation of abundant natural resources: four reflect the so-called ‘resource curse’ (Peru and Bolivia in South America, and Nigeria and Niger in Africa), while two are regarded as ‘successful’ cases where the perverse effects of dependence on natural resource abundance have been managed and, if not avoided, have at least been less severe.
The underlying premise is that resource dependence undermines the development of institutions, understood as ‘rules, formal organizations, social norms and practices, framing devices and belief systems’ (p. 2), essential for sustainable development. The authors operationalise this concept as a situation with relatively low levels of inequality and social conflict and a relatively high level of environmental sustainability (although they also give attention to political and economic sustainability in their analysis). By using detailed case studies to compare countries which have been relatively successful in avoiding the perverse effects of resource dependence with countries that have been relatively unsuccessful, the authors put to the test a model which attempts to explain these differences.
Because the ‘model’ proposed attempts to provide a coherent explanation of the results of the historical development processes of six countries in two continents, each with its own specificities, it is necessarily very general and emphasises broad processes and influencing factors rather than variables and cause-and-effect relationships. The argument is that high levels of dependence on abundant natural resources tend to promote the centralisation and concentration of economic and political power. However, whether this concentration of power and resources will be employed by national elites to promote economic and political diversification (including some degree of decentralisation), which the authors understand to be essential for achieving sustainable development, will depend on the extent to which strong institutions have been or are developed. This, in turn, depends on three key factors: timing, sequencing and leadership. Timing refers to whether, at the moment of wealth generation during periods of exploitation of abundant resources, the international or national context promotes or permits institutional development. Sequencing refers to whether, at the moment of the exploitation of the abundant resources, some institutional consolidation has already occurred, so that some level of capacity exists for the management and distribution of the wealth generated in order to produce sustainable development, or whether such consolidation has not yet occurred or may have deteriorated. Finally, leadership refers to the presence in some countries at crucial historical moments of leaders who have promoted institutional strengthening and sustainable development.
How well does this model fit the historical experiences of the three South American countries studied? José Carlos Orihuela argues that the case of Chile illustrates ‘how important a state apparatus can be to overcome some of the challenges that mining-based development is likely to generate’ (pp. 19–20), and demonstrates how the institutional development of the state has been important not only for Chile's successful territorial expansion, but also for its resource-based development. In support of this argument he reviews the processes associated with resource exploitation in three historical periods which he terms ‘Interior’ (1830s to 1930s), ‘CORFO’ (1930s to 1970s) and ‘Hacienda’ (1970s to today). He concludes that ‘the Chilean experience shows a long process of state-making in the name of reason and the future of Chileans’ (p. 34), achieved through ‘the building up of layers of enlightened bureaucratic autonomies within a broadly shared nation-state process’ (p. 38). Nevertheless, he also highlights concerns about the environmental and social sustainability of the industry in the light of scarce water resources in mining areas, costly energy demands and conflicts over the rights of indigenous peoples.
In their comparative analysis of the cases, the authors are cautious about their characterisation of Chile as a success: ‘The Chilean resource-based growth model, for all its virtues, has indeed created exclusion, group inequalities, ethnic violence, and environmental degradation, as well as the state institutions to better manage and repress … The economic opportunity gaps are still vast and the exercise of political voice is minimal’ (p. 177).
In her analysis of the Bolivian case, Maritza Paredes emphasises the disconnect between state autonomy and state capacity when mineral booms and the associated rents generated opportunities for the state to expand, gain autonomy and become more democratic but without, at the same time, developing state capacities. She argues that periods of state expansion and increasing autonomy were also associated with poor state capacity, which she attributes to timing (with expansion preceding the development of state capacity) and the type of elite politics developed in earlier periods. Paredes concludes that the Bolivian experience shows that ‘state revenues can be a necessary but not sufficient condition of state underdevelopment’ (p. 102). Nevertheless, while Paredes presents a fascinating and cogent analysis of the effects of mining on state capacity and sustainable development, she makes little more than a passing reference to how these same processes have played out with the natural gas boom of recent years.
For her part, Thorp maintains that ‘for Peru, context, pathways and timing have all worked out badly in the past, and [have] allowed strong negative relationships to go unchecked’ (p. 110), in part due to the fact that ‘the subtle institutions of a diversifying economy, with all that implied in terms of investment in capacities, were never necessary: the business elites could make their fortunes with highly diversified portfolios based in primary exports and managed through Lima’ (p. 111). As a result, she concludes, ‘the local-level institutions necessary to manage the situation, both in terms of developing alternative opportunities and mediating conflict, are severely underdeveloped, following centuries of centralized political and economic development’ (p. 113). She attributes this situation to the failure to manage three fundamental structural problems: ‘the centralization of the state and bureaucracy with limited capacity for devolution, the limited capacity for diversification at macro or micro levels, and the confusion over public and private roles, which makes it hard to act on the lack of transparency and accountability’ (p. 127).
In their comparative analysis the authors underline the aggravation of group political, social and economic inequalities and the weak capacity to manage local-level development that might contribute to the reversal of inequalities, and claim that ‘Peru's resource endowment has played a key role, in interaction with geography and social structures, in creating inequality’ (p. 192). Moreover, they argue, ‘political participation has been extremely low, a result of the interaction of exclusion, prejudice, internalization of inferiority, and the clientelistic nature of the political system, above all at the local level’ (p. 194). Writing at the beginning of a new government in Peru, elected on a platform promising political and social change, they express cautious optimism that, during the current mining-based resource boom, state capacity to regulate, diversify and redistribute will be strengthened in order to reduce inequality and promote sustainable development. However, many of the factors analysed in this book have in fact contributed to a continuation of public policies in Peru that have made limited gains in developing state capacity, reducing inequality, protecting the environment, diversifying the economy and eliminating discrimination, despite impressive rates of economic growth.
In conclusion, the authors maintain that in Chile strong and previously existing institutions and the political forces driving their creation did generate some improvement in income distribution; that in Bolivia a political model of accommodation was only too effective in achieving continuance of socio-economic inequalities; and that in Peru resource dependence produced local institutions and actors that were weak and ineffective in the spreading of development.
The authors claim that their contribution lies in ‘showing how an assortment of resource-based development curses and traps are likely to entrench and perpetuate themselves through interactions between institutions and extractives’ (p. 204). In this sense, despite the authors’ interest in offering guidance to policy-makers, they provide no simple solutions or universally applicable policy measures. Rather, their emphasis on the importance of long-term historical influences on present-day management and policies highlights the many and complex barriers to achieving policies and changes that promise to reduce inequality and promote sustainable development.
The authors’ stress on the importance of concentrating revenues and political power in order then to develop state capacity, at both local and national levels, and diversify the economy provides a welcome counterweight to the current emphasis on economic growth, a minimal state and reduced regulation. Those readers who are interested in particular cases may find that the limitations imposed by a chapter-length analysis do not satisfy their need for more detailed information and argument. Those readers who are searching for a theoretical model that provides a comprehensive and detailed explanation of the conditions under which the ‘resource curse’ can be avoided or mitigated may also be disappointed. However, this book represents a heroic attempt to combine the advantages of detailed country case studies that have a degree of historical depth, and the advantages of a theoretical model or framework which permits a comparative analysis of the cases and highlights some of the key factors that influence favourable and unfavourable outcomes in countries whose development is based on natural resource extraction. In doing so, it represents an important contribution to the ongoing task of expanding our understanding of these processes and their implications for policy-making, resource management and sustainable development.
