2.2 O&G Activities and Their Impact on Host Environments …
21
Warner, 2001, p. 385). Gylfason (2001) postulates that resource abundance hinders
poverty alleviation because the heavy inflow of O&G money into the host country
may create a false notion of income security. This makes host governments shift the
focus from investing in “growth-friendly economic development” (Gylfason, 2001,
p. 850) into something that is not vital to a country’s basic welfare.
[…] Nations that believe that natural capital are their most important asset may develop
a false sense of security and become negligent about the accumulation of human capital.
Indeed, resource-rich nations can live well of their natural resources over extended periods,
even with poor economic policies and a weak commitment to education. Awash in easy cash,
they may find that education does not pay. Nations without natural resources have a smaller
margin for error and are less likely to make this mistake. (Gylfason, 2001, p. 858)
However, not everyone agrees that O&G activities and revenue hinder development
and democracy. Critics (Boschini, Pettersson, & Roine, 2007; Jeffery, Ossowski,
Daniel, & Barnett, 2001a, 2001b; Larsen, 2006) argue that there is no final say in
the correlation between a country’s O&G production and exportation and their levels
of development. The relevant literature indicates that what hinders development is
not the resource activity and revenue, “but the combination of poor institutions and
resource wealth” (Boschini et al., 2007, p. 614; Larsen, 2006). According to Boschini
et al. (2007), the way a country governs its exports, oil revenue and social programmes
may turn resource abundance into an asset rather than a curse.
Davis et al. (2001) argue that governments may prevent the resource curse by
setting a fiscal policy that maintains a non-oil-fiscal balance while restraining expenditure—when oil prices rise. The authors advocate for transparent and public participation for exploring effective and creative ways for circumventing oil price risk,
therefore, preventing the resource curse. Critics of the resource curse claim that
deterministic claims of oil production and development are proved risky because
they might inhibit oil investment in a country, and yet not address its governance
(Boschini et al., 2007; Jeffery et al., 2001a, 2001b; Larsen, 2006).
Institutions such as the World Bank Group fund major O&G activities in countries
with low indices of human development and high indices of corruption, based on the
claim that O&G activities promote social development. I turn now to the international
banks and their participation in O&G activities in resource-rich countries.
2.3 International Banks and Their Impact
on the O&G Industry
O&G companies argue that their participation in resource-rich countries provides
host nations with national and local development. The report The Wealth Beneath
Our Feet, published by the Taranaki Venture in 2011, discusses O&G activities and
their impact on Taranaki, New Zealand. The report argues that O&G activities in New
Zealand have strengthened local economies, promoted capacity building, generated
human capital, increased the income of domestic employees and prompted further
21
Warner, 2001, p. 385). Gylfason (2001) postulates that resource abundance hinders
poverty alleviation because the heavy inflow of O&G money into the host country
may create a false notion of income security. This makes host governments shift the
focus from investing in “growth-friendly economic development” (Gylfason, 2001,
p. 850) into something that is not vital to a country’s basic welfare.
[…] Nations that believe that natural capital are their most important asset may develop
a false sense of security and become negligent about the accumulation of human capital.
Indeed, resource-rich nations can live well of their natural resources over extended periods,
even with poor economic policies and a weak commitment to education. Awash in easy cash,
they may find that education does not pay. Nations without natural resources have a smaller
margin for error and are less likely to make this mistake. (Gylfason, 2001, p. 858)
However, not everyone agrees that O&G activities and revenue hinder development
and democracy. Critics (Boschini, Pettersson, & Roine, 2007; Jeffery, Ossowski,
Daniel, & Barnett, 2001a, 2001b; Larsen, 2006) argue that there is no final say in
the correlation between a country’s O&G production and exportation and their levels
of development. The relevant literature indicates that what hinders development is
not the resource activity and revenue, “but the combination of poor institutions and
resource wealth” (Boschini et al., 2007, p. 614; Larsen, 2006). According to Boschini
et al. (2007), the way a country governs its exports, oil revenue and social programmes
may turn resource abundance into an asset rather than a curse.
Davis et al. (2001) argue that governments may prevent the resource curse by
setting a fiscal policy that maintains a non-oil-fiscal balance while restraining expenditure—when oil prices rise. The authors advocate for transparent and public participation for exploring effective and creative ways for circumventing oil price risk,
therefore, preventing the resource curse. Critics of the resource curse claim that
deterministic claims of oil production and development are proved risky because
they might inhibit oil investment in a country, and yet not address its governance
(Boschini et al., 2007; Jeffery et al., 2001a, 2001b; Larsen, 2006).
Institutions such as the World Bank Group fund major O&G activities in countries
with low indices of human development and high indices of corruption, based on the
claim that O&G activities promote social development. I turn now to the international
banks and their participation in O&G activities in resource-rich countries.
2.3 International Banks and Their Impact
on the O&G Industry
O&G companies argue that their participation in resource-rich countries provides
host nations with national and local development. The report The Wealth Beneath
Our Feet, published by the Taranaki Venture in 2011, discusses O&G activities and
their impact on Taranaki, New Zealand. The report argues that O&G activities in New
Zealand have strengthened local economies, promoted capacity building, generated
human capital, increased the income of domestic employees and prompted further