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Oil to Cash: An Idea to Fight the Resource Curse
January 5, 2011
Tina Rosenberg has a terrific piece in the New York Times on cash transfer programs in Brazil. She concludes:
For skeptics who believe that social programs never work in poor countries and that most of what’s spent on them gets stolen, conditional cash transfer programs offer a convincing rebuttal. Here are programs that help the people who most need help, and do so with very little waste, corruption or political interference.
That’s one reason why cash transfers are increasingly popular not only in places like Brazil and Mexico, but also Mongolia, Malawi, and other poor countries.
Just as cash transfers are gaining recognition, there are also a bunch of countries facing the very real problem of what to do with newly-found oil wealth. Ghana began pumping oil last month, Cambodia and Uganda will start this year, and the likes of Liberia, Sierra Leone, and Papua New Guinea may be next. Given the problems so many countries have faced managing oil (Nigeria has earned some $400 billion from oil but its population has gotten poorer), so many of these new producers are fragile states, and the very limited ideas we have so far (sequester funds, promote transparency, cross your fingers) isn’t it perhaps time to try something fresh?
Why not just give the money to the people? Why not ride the wave of cash transfers to break the resource curse? Here is my short working paper that explains how it all might work and why. For those of you who can already think of why this idea cannot work in your country, I try to address those objections too. (If you have ones that I haven’t answered, please let me know.)
This paper is part of our Oil to Cash Initiative. We already have papers out on Ghana, the politics of cash transfers, with more to come soon.
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4 Responses to “Oil to Cash: An Idea to Fight the Resource Curse”
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January 5th, 2011 at 4:39 pm
Given the intergenerational issues around natural resource exploitation, have you considered whether a conditional cash transfer program targeted to building human capital in the next generation of kids could work? I know there is the economist’s love of minimum transaction costs, but a couple of studies have shown that conditionality actually makes a difference for how families spend transfer funds (i.e., more on children’s education, more nutrition foods, etc.).
January 6th, 2011 at 1:47 pm
This is an excellent idea. In many ways, the Bayelsa Child Development Account: Savings, Training And Rewarding Savers (CDA STARS) Project in Nigeria has operationalized this concept. Designed by Columbia University and the Global Assets Project at the New America Foundation,the Bayelsa CDA STARS project is the first child savings policy pilot in a developing country. CDA Stars will open seeded bank accounts for 1,000 junior secondary students from public schools spanning eight local government areas. In part, Nigeria’s newly acquired oil wealth made this seeded and matched savings policy pilot possible. For more information on the project visit: http://www.bayelsacdastars.com.ng/
January 7th, 2011 at 11:32 am
The evidence is mixed on the importance of conditions to the use of transfer monies. Ozler’s paper looks at a small-scale evaluation of a schooling CCT in Malawi, but Handa’s paper is contrasting the scaled CCT to mothers in Mexico with an unconditional transfer to male HH heads in Mexico:
http://www.unc.edu/~shanda/res.....Aug_04.pdf There is more literature on this issue that we should dig up.
But whether to condition or not depends on the objective of the transfer. In this case, generating inter-generational benefits will be important given the inter-generational trade-offs implicit in today’s natural resource exploitation. You might discuss the conditions that do most to encourage households to invest in their children’s well-being, but surely the most consistent CCT outcomes such as improved young child nutrition, reduced child labor market participation and higher school attendance and completion are lasting investments that pay off for other welfare meansures long-term. And only some aspects of the conditions require a supply response (i.e., nutrition).
Also relevant to the use of transfer funds is the recipient of the transfer — mother or female head of household versus male head of household (likely to be default if you don’t specify otherwise).
January 7th, 2011 at 9:21 pm
Of course such transfers help… but most especially if the transfers are made in such a transparent way that there is no discrimination of those receiving them and those receiving them do not have to view the transfers as a political favor to them.
If there are no cash transfers the least that should occur is each one of the citizens receiving from the state an oil receipt saying for instance in Venezuela… “I, hugo chavez, have received from you as your share in the oil revenues the contribution of 2.300 dollars this year. Thank you!”
But how difficult it is to fight for the rights of the citizens to decide on their oil revenues when organizations like EITI, which basically has hijacked the debate on the oil-curse, even when most of its active members come from oil consuming countries, state, as their 2nd Principle “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development”
I, as an oil-cursed, citizen cannot but appreciate the efforts by the Center for Global Development to put the citizens first.