Does Oil Hinder Democracy?

Some political scientists suggest that oil in the Middle East explains why the region has failed to be democratic. Is it true that oil impedes democracy and can this claim be generalized for all oil producing countries? This paper will examine Michael Ross’s independent, dependent and other intervening variables and use them to describe the processes that link these variables according to Michael Ross’s assertions.  

Independent variables

Oil reliance and mineral reliance

Oil reliance is measured by the value of fuel based exports divided by GDP while Mineral reliance is measured by the value of non-fuel mineral exports divided by GDP. These two variables outline both the importance of fuel based products and mineral resources as sources of export revenue and their relative importance in the domestic economy. Brunnschweiler and Bulte, argue that this is a measure of resource dependence and using Ross’s data, we find that although fuel exports measured in its current value was higher in Norway than in Bahrain in the year 1996, fuel exports accounted for than half of Bahrain’s GDP but a mere 17% in Norway. This implies that low quality institutions may distort production for export of goods. This explains why greater resource abudance leads to better institutions and not the other way round. Another author, Dunning, finds out from his data that ‘oil rents’ dependence has a significant negative effect on the economy, but in reality, oil rents per capita have a positive effect on democracy. There is enough evidence to show that oil has a positive effect on the durability of a regime in authoritarian states, and this does not support Ross’s assertion that an increase in resource wealth has a negative effect on democracy. This shows that there is a big correlation between oil and democracy, which is even larger than the oil coefficient.

History

History is measured as the type of regime (which is a dependent variable). According to Horiuchi and Wagl´e, a country’s history and institutions determine the type of regime instead of the abundance of resources itself. This explains why when controlling for fixed effects of a country using the Fixed Effects model, there is no empirical support for the reasoning that oil hurts democracy. There is also the importance of initial conditions and therefore Ross’s panel data regression analysis treating different countries as homogeneous units is wrong. They argue that if countries are treated as homogenous then they will be no evidence of empirical support for Ross’s assertions.    

Income

It is measured as a natural log of per capita income. Modernization effect suggests that when income rises, modernizing and cultural changes follow suit and further that modernization motivates growth of democracy. Therefore, increase in income motivates democracy albeit indirectly but again, because resource wealth does not motivate social and cultural modernization, it does not result to more democratic governments either. Income measure also includes oil wealth.

Islam

This is measured as a percentage of the total population that is Islam. Islam is taken as a time invariant variable. Ross argues that earlier studies in 1970s suggested countries with a higher Islam percentage are less democratic.

Ross’s model includes Islam as a variable consisting the percentage a country’s Muslim population against the country’s population. The relationship between this variable is studied and ‘oil rents’ are studied drawing a relationship between oil, religion and gender representation. We can see that as a variable, Islam is a problem because account for Islamic sects differences that does not agree on Sharia interpretations of the Quran including the Shia, Sunni, Ismailia and Ahmadiyya sects. Ross uses gender equality of several oil producing countries like Tunisia, morocco and Syria to oil rich countries like Saudi Arabia, UAE and Oman. He then compares gender in this categories and concludes that non-oil-producing countries have a higher gender equality due to lack of ‘oil rents’ rather than being an Islamic issue.

OECD

This refers to the membership of a highly proxy of developed societies. OECD is taken as a dummy variable. It has the value of 1 for OECD members 0 for non-members. This has been included because members of this proxy have been found to be relatively democratic.

Dependent variable

Type of regime

The type of regime either democracy or non-democracy is a dependent variable. Regime is a measure of regime characteristics and Ross scales it on a 1to10 variable; 1 represents the least democratic while 10 represent the most democratic. The model again includes control variables like income, Islam, OECD, year dummies and regime. Ross further includes minerals and oil to try and conclude if they append explanatory power, this is done while varying explanatory variables in a span of 5 years.

Minerals and oil are sued in measuring relative importance of fuel and mineral exports. Ross assumes that oil has a negative effect on democracy; =>oil (like minerals) generate rents, =>the rents (like oil rents) are captured by the states and =>mineral extraction (like oil extraction) use relatively little labor. These are the features of a ‘rentier state’ and Bablawi studies points out that government budget in most oil states is one sided; oil revenues are distributed to the people and the government does not need taxes from them and the citizens become less demanding in political participation.

Casual mechanism Explanations

Michael Ross argues that there are three main causal mechanisms that explain the connection between fuel-based export revenues and undemocratic regimes. These three are; the rentier effect, the repression effect and the modernization effect.

Rentier effect

The explanation is that oil rich regimes use low taxes and results in patronage to relieve pressures for more democracy because low domestic taxes reduce demands for government accountability. This is contradicted with domestic demands in such countries like the U.S. that demands for government accountability to its citizens; because they pay taxes. But for oil rich countries, they spend more on patronage that reduces democratization pressures while government sponsored associations will push out independent civil rights.

Repression effects

Oil wealth regimes spend on extra security which is needed to quell any repression conflicts. This is because mineral wealth is usually concentrated on certain regions but benefits have to be diffused across the country. 

Findings

Oil and democracy

A regimes reliance on oil or mineral exports makes it less democratic and this effect is not caused any primary exports. This explanation is not only limited to the Middle East nor sub-Saharan Africa but to every oil producing country.

Rentier effect

That higher personal taxes are associated with democratic governments and the larger the government, the less democratic gains it has in the subsequent five years.

Repression effect

Oil wealth is more linked to higher levels of spending on the military. This turns out to impede democracy. Interestingly, this is not the same for mineral wealth and also does not give evidence for higher military personnel.

Resources curse?

That states with more natural resource wealth grow at a slower rate than the resource poor states. States with more natural resources experience more civil strives. States with oil and mineral wealth are less democratic and this relationship is especially common Africa, Asia and Latin America, it is not only a phenomenon in Middle East.