Oil Economics
Moths are drawn to a flame and the greedy and ambitious are drawn to money and power. Where there are many flames, the moths will divide their attention. Where there is only one huge flame the moths will all go there. Where there are many sources of money and power the greedy and ambitious will divide their attention. Where there is one great source of wealth and power all the greedy and ambitious will gather around it and struggle desperately for what they can get.
The oil wealth of the Middle East is a huge flame drawing all the ambitious and greedy to it. Instead of building a factory here, starting a farm there, creating a business over there, all go to the one source of wealth. It occupies their dreams and their attention. The one road to wealth and power that they can see is to get close to it and to those who control it. Other methods of gaining wealth that would build a strong economy and stimulate the creation of wealth throughout the nation are ignored. Those outside the inner circle remain poor, powerless, and oppressed.
This is why the economies of the oil wealthy countries of the Middle East are weak. This happened to Spain when the gold of the New World began pouring in. People stopped farming, manufacturing, developing their own resources. All attention went to the gold ships and getting their share of that wealth. After a couple of centuries of this kind of ‘wealth’ Spain was among the poorest and most backward countries in Europe.
“Poland, where the feudal system still continues to take place, is at this day as beggarly a country as it was before the discovery of America. The money price of corn, however, has risen; the real value of the precious metals has fallen in Poland, in the same manner as in other parts of Europe. Their quantity, therefore, must have increased there as in other places, and nearly in the same proportion to the annual produce of its land and labour. This increase of the quantity of those metals, however, has not, it seems, increased that annual produce, has neither improved the manufactures and agriculture of the country, nor mended the circumstances of its inhabitants. Spain and Portugal, the countries which possess the mines, are, after Poland, perhaps, the two most beggarly countries in Europe.” Adam Smith, “The Wealth of Nations” “Those countries, however, are poorer than the greater part of Europe. Though the feudal system has been abolished in Spain and Portugal, it has not been succeeded by a much better.”
This has nothing to do with the US, Europe, Russia, or anyone else. It is human nature. People do what they do because of what they see. Only a policy of economic development taking this into account and working to stimulate other areas of the economy can change this. The problem with this is that generally such policies are seen as opportunities to grab some of the oil money rather than to actually create new businesses and wealth. Corruption and greed say, “Take what you can get. Put it in a bank and then go for the next government program.” A strong economy is built from the bottom up, not the top down.
“It is likely to increase the fastest, therefore, when it is employed in the way that affords the greatest revenue to all the inhabitants of the country, as they will thus be enabled to make the greatest savings. But the revenue of all the inhabitants of the country is necessarily in proportion to the value of the annual produce of their land and labour.” Adam Smith, “The Wealth of Nations”
Pouring money down from the top only stimulates corruption as the greedy attempt to grab as much of it as they can for themselves.
“The cheapness of gold and silver, or what is the same thing, the dearness of all commodities, which is the necessary effect of this redundancy of the precious metals, discourages both the agriculture and manufactures of Spain and Portugal, and enables foreign nations to supply them with many sorts of rude, and with almost all sorts of manufactured produce, for a smaller quantity of gold and silver than what they themselves can either raise or make them for at home. The tax and prohibition operate in two different ways.” Adam Smith, “The Wealth of Nations”
The poor also see it only as an opportunity to live on charity. In Spain everyone was poor, but they were also too proud to work. Land went undeveloped, people who just claimed land and started working it were paid to do so. Property which could develop wealth was unused because the poor were too proud to work. All of these problems afflict the different countries of the Middle East today for the same reason. The Middle East is as cursed with the black gold, oil, as Spain and Portugal were cursed with the gold and silver of the New World.
It is easy to blame things like this on foreign powers exploiting the oil wealth of these nations. It is always easier to blame others for problems rather than attempting to actually correct them. Since these problems are built into the very fundamentals of all oil based economies, they are extremely difficult to correct. Human nature creates dependence on the part of the poor and corruption among the powerful in the presence of such highly concentrated wealth.
Foreign moneys are always subject to the same kind of corruption and abuse as oil moneys. Artificial attempts to create better economies in third world countries by monetary contributions, grants, or loans only stimulate corruption among the powerful and dependence among the poor. The countries which have been on international welfare for decades are today poorer and less developed than they were when it started.