False Economy - Alan Beattie [55]
Big increases in an oil-producing country's income rarely translate into sustained catch-up. The first big oil shocks in the 1970s involved a big shift of income away from oil-importing countries like Japan and most of Europe and toward oil exporters, notably the Middle East. The
Arabs had the rest of the world over a barrel. It was inevitable that oil importers would take a hit on their real incomes. Some, such as Germany, where unions and management agreed to share the burden by holding down wages and prices, coped with it better than others, such as Britain, where a destructive round of leapfrog wage claims took hold. But the oil exporters did not use the shift in prices to catch up with the incomes of the importers. By 2000, Saudi national income per head was still below that of countries like the Czech and Slovak republics, which had been Communist command economies a mere fifteen years before, and less than half that of the Western European average. A lottery bonanza is not a substitute for a dynamic, innovative economy.
As part of Libya's rehabiliation in the eyes of Western countries after the September 11 attacks, Colonel Muammar Gadhafi, that country's ex-pariah leader, called in outside consultants. They included Michael Porter, a Harvard academic specializing in the "competitiveness" of economies, to advise him on what he could do to diversify the Libyan economy. One consultant reportedly described Libya as "a mess." With price and wage levels in manufacturing too high to be competitive, thanks to the oil, Libya's economy has struggled to find something else it can do.
Appropriately enough, one of the few oil states that seems to have diversified successfully is one without much oil of its own. Dubai, one of the United Arab Emirates, has generally been much less dependent on oil than other Gulf states. Having long developed a role as a trading post, with a good deal of smuggling of gold and other contraband to India on the side, Dubai managed to expand this into a banking and finance hub. It has added tourism and even a cluster of biotechnology research from scratch. The emirate has dealt with the uncompetitiveness problem by bringing in cheap temporary workers from India, Pakistan, and Bangladesh, whose incomes and living conditions are way below those of the pampered Dubai citizens.
But the resource curse can trip up even economies that are making valiant attempts to diversify. The Dutch tulip kings are not the only flower-growers to have suffered from the Dutch disease. Perhaps one of the most extreme examples happened a few years ago in Zambia. The republic of Zambia was built on copper—"born with a copper spoon in its mouth," as the saying went. Travelers arriving at the national airport in Lusaka are greeted by a fountain made out of a huge chunk of copper ore, and a giant map of Africa made out of burnished copper hangs on the wall of the arrivals hall just to make the point absolutely clear.
As with many African countries, Zambia's management of its natural resources after independence was a sad history of inept resource nationalism. By 1970 it had taken control of the copper mines from Anglo-American, the mining company that, fulfilling at least half its name, is listed jointly on the stock exchanges in London and Johannesburg. Zambia then went ahead and squandered much of the proceeds accruing from rising commodity prices in the 1970s and seriously mismanaged the mines themselves. Konkola Deep, a mine that extracts copper from the second-biggest deposit in the world, drops a kilometer and a half below-ground through rock riddled with underground streams. Hundreds of thousands of cubic meters of water have to be pumped out of the mine each day to keep it functioning. But under state ownership, maintenance and investment were neglected. By the 1990s, when Kenneth Kaunda, the first president, had finally been ousted from office, copper prices were low and the mine could only attract