Oil and Democracy

Introduction

Researchers on democracy believe that oil contributes negatively towards the development goals of countries endowed with it (Springborg & London Middle East Institute 2007, p.45). According to research by certain scholars, the rise in income due to oil exploitation usually leads to increased democracy. Others contradict this statement by arguing that oil has properties that hinder democracy (Heradstveit & Hveem 2004, p.62). This argument has been used as an explanation for why oil-exporting countries such as Nigeria, Indonesia, and Venezuela have political problems. However, this claim has not been substantiated by any statistical analysis in both the Middle East and beyond.

In this article, the pooled time series information obtained from 114 countries from the year 1971 to 1997 has been used to demonstrate that oil endowment has been linked to undemocratic developments. It also wishes to establish that the consequences are not only felt in the Middle East and that even other minerals contribute equally to the same effect.

The aim of this article is to enable scholars who study democracy to take interest in the Middle East. This is because many scholars who are involved in the study of democracy usually avoid the Middle East by not including these counties in their analysis. The neglect of these states from research has resulted in the weakening of general findings, as well as reducing the level of studies in the Middle East politics (Feldman 2003, p.13).

Another aim of this article is to bring to focus the matter of a 'resource curse'. It has been observed that many developing countries have high amounts of natural resources, which are suspected to have caused high levels of underdevelopment (Dunning 2008, p.25). Fundamental to this discussion are some case studies which will be used to draw a relationship between oil and democracy. Some existing theories will also play an imperative role.

Testable hypotheses

Repression Theory

According to Ross (2001), counties that export oil can channel their resources in repressive facilities that make their leaders stay in power despite dislikes from the masses. These channels include firearms and a strong military base that are linked to undemocratic leadership. A country where majority of the population are Muslims and there are high amounts of oil is less affected by external pressure to develop democracy. As a result, these regimes are able to control opposition in times of crisis and survive, thus manifesting 'robustness of authoritarianism.

Rentier Effect

Rentier effect is considered the best reason why there has been no lack of democracy in the developing countries that depend on oil for their economic survival. According to this effect, the existence of oil in developing countries results in increased income, which allows these nations to finance their economic activities through the spending effect. It also results in the reduced level of tax imposed on the people in that country that makes them less concerned with the affairs of monitoring the decisions that their leaders have made. Social organizations have also been disarrayed, thus resulting into low pressure on the government as to their accountability for the decisions they make in the use of revenues from oil exploitation. This results in an authoritarian type of leadership, where the government is controlled by the elites, as contrary to a democratic type of leadership, where major decision making is made by both the government and the popular masses.  However, the leaders can allow the existence of democracy by allowing the masses to contribute towards economic decisions.

Rentier effect has been observed to contribute towards de-democratization through some observable means, such as the increasing ability of the elites to minimize the level of democracy by way of the spending effect and preventing the masses from participating in the affairs of their countries through the taxation effect. This allows the leaders of such countries to have control over the affairs concerning oil wealth and revenue distribution with their interest put on the forefront. Rentier effect has also been observed to contribute to de-democratization by reducing the capability of the majority citizens to criticize the activities of the government through the group formation effect. Rentier effects result into low development of the civil society and democracy. According to theorists, Rentier effects result into an authoritarian type of leadership, mainly in oil rich countries.

According to Beblawi, Rentier states usually have common characteristics, such as control of employment provisions by the government. Laws within such a country are also not favourable for foreign investors who do not exercise enough control of their operations. Thus being a citizen of a rentier state is an advantage in a way, seeing that foreign investors often have to seek the sponsorship of a local person to carry out their operations in his name.

The Spending Effect

It is clear that oil dependent countries would not be so well off if they were not endowed with the resources, as compared with the countries that do not produce oil. The information concerning the management of oil resources is usually under high security from the government and is mainly managed through national oil companies. In Nigeria, for instance, more than half of government’s revenue is obtained from oil exportation, and this item is excluded from the national budget. Thus, government expenses equal less than half of what the country actually has. In Angola, more than half of the national budget comes from a national oil company. Consequently, the information in the records of the government does not give the exact value of the level of income and expenditure in countries that export oil.

However, in spite of the government secrecy towards the divulging of information regarding income from oil, there is still a connection between the size of oil-exporting countries’ annual income and the level of government spending, irrespective of the value of a country’s fixed resources.

Case Study of Effects of Oil Wealth on Democracy of Libya

Libya is one of the countries with the most valuable reserves of oil in the world, which has also contributed to the high levels of undemocratic rule. The Gaddafi administration enjoyed plenty of economic gains and there were other people within the country that would also have liked to benefit from the resource, such as the rebels.

Libya is an example of a country where the effects of oil wealth on democracy can be observed clearly. For instance, there have been cases where rebels have engaged in deals with foreign countries, such as Saudi Arabia, for the sale and control of Libya’s crude oil under their management, resulting into a lack of stability in the government. Rebels have joined forces with foreign countries to have control of crude oil deposits without being held accountable for their actions. They have also intimidated other countries that have shown interest in strengthening the economy of the country and developing strong military base to challenge the interests of the West.

Libya is also one of the leading suppliers of crude oil in the international market and enjoys a strong influence on the world price change (Karl 1982, p.23). Moreover, Libya has not shown democracy in dealing with other countries in the sale of its oil. Its trade in oil was biased towards countries that could aid Libya materially with military facilities and support of the Gaddafi administration.

Social protests were observed in Libya since Gaddafi had taken power; for instance, the military revolution against the government. The major reason for the revolution was the lack of democracy, authoritarian rule, and heavy use of military force to control the country. He managed to do this by taking advantage of high revenues from the sale of oil and purchasing powerful military facilities that ensured he maintained leadership.

The protests and military revolutions were caused by a number of factors, such as protest against poor living conditions (David Suzuki Foundation 2010, p.34). The government was well financed to support the economy of the country. However, its economic decisions were channelled towards accomplishing the ambitions of Gaddafi, leaving people to live under the unsatisfactory conditions and authoritarian leadership. There were other factors that resulted into the lack of democracy in Libya, such as the Muslim people who had rebellious attitudes towards the government.

Despite the effort that was put forward by the United States and its allies to remove Muammar Gaddafi from power, there is evidence that assisting rebels to have control of the government will not result in reduced oppression, nor the emergence of democracy in the country.

Analysis Methods and Techniques

This section of this article discusses the contributions of oil wealth to the failure of a regime, such as mass protests and civil wars. The data were obtained from 113 countries from the developing world between 1959 and 2000. The data were used to carry out analyses of oil exporting countries that have not been carried out. The data were obtained from the time there was an oil boom and the time when oil prices fell, i.e., in the year 1986.

Dependent Variable

In order to obtain a clear understanding of the effects of oil wealth, independent variables, including regime collapse, mass protests, and internal wars in a year in a country were put under scrutiny. Regime failure is derived from the policy data and coded 1 for every year, in which a value of 0 has been assigned as the durability variable. Secondly, the effects of oil wealth on civil wars within a country are measured. The codes 0 to 3 are assigned where 0 means conflict without arms, 1 implies conflict where there are 25 battles which result in death in 1000 battles, while 3 indicates the occurrence of 1000 deaths in a given year.

Independent Variable

This is a measure of the value of oil exports to annual income in a given year. It examines the contribution brought by exporting oil and the developments it brings to the country. Some of the variables in this category are the BOOMEFFECT, i.e., the product of independent variable and the dummy variable, the BUSSEFFECT, the product of the contribution of oil exports to the economy and the dummy variable that counts incrementally from 1 to values that are not zero for the boom effect. These variables account for the level of dependence on oil exports, the deviation from the 19 most dependent states. This form of construction of analysis allows the assessment of both the hypothesis that boom and bust consequences of politics and the explanation that more states that were dependent were most affected by authoritarian rule, compared with states less dependent on oil as source of income.

Control Variables

There are other economic controls that are thought to have an effect on the durability of a regime and democracy so that the independent factors of oil reliance are covered. The GDP is included in this model to contribute negatively towards the emergence of protests, regional conflicts, and collapse of a regime. Inflation is also included to account for the level of change in consumer prices and its probable effects on protests and regional wars that result into civil wars. In addition, rates of economic growth are included with the belief that it is likely to result into development of a regime and the possibility of civil wars and anti-state disagreements.

Social and political indicators are included by determining regime type, obtained by subtracting the autocracy score from the democracy score in every state in every year. The expectation is that higher scores of democracy should lead to survival of a regime. The following are the support for this argument:

Effects of Oil Wealth on Regime Failure

In an effort to explain the effect of oil wealth on regime failure, the determinants of regime failures, obtained from 113 developing countries, are used for regression analysis. In this case, a negative regression value indicates that the effect is less likely to result into regime failure. The results are supportive to this hypothesis in that it impacts positively on regime failure.

This can be explained by the fact that oil-rich countries benefit from the existence of a regime due to access to oil rents in comparison to similar developing countries which do not depend on oil. It explains that oil dependence contributes to the durability of a regime, but negatively towards democracy. It further explains that repression allows oil-exporting countries to survive during crises. An example of a country in Africa whose regime has been sustained by oil wealth is the Libyan leadership under Muammar Gaddafi.

Effects of Oil Dependence on Civil Wars

In the regression analysis of effects of oil dependence on civil wars, a negative value indicates that it is less likely to result into a civil war. Due to diversity in ethnicity, there is usually likelihood of civil wars. Democracy is also likely to result into civil wars in a five-year lag, but not in one-year lag model. There have also been observations that Islamic democratic states are likely to experience civil wars. Among the developing countries, the countries that had democracies in the earlier times are more likely to experience civil wars.

Countries in Sub-Saharan Africa have dummy variables that contribute to existence of civil wars, indicating that more than 50 countries in that part of Africa are likely to be represented by a few countries in cases where civil disagreements have emerged. Economic improvement, however, contributes negatively towards the likelihood of occurrence of civil wars. In addition, geographic and economic contributors such as size of land and the size of population are factors that also contribute to civil wars. A large area and densely populated area are likely to result into occurrence of civil wars. An example of a country in Africa where civil wars are common because of oil wealth is Angola.

Effects of Oil Dependence on Social Protests

After doing Poisson regression analysis on the effects of oil wealth on the emergence of regional anti-government protests, it has been found that oil wealth contributes to stability and reduces the chances of protests. This can be explained by the fact that the level of repression is high in these countries. During the analysis of the independent effects of repression, the dummy was used for countries with high authoritarian regimes. It was revealed that highly authoritative states went through a large number of protests compared with others.

In Africa, low urban development and economic improvement contributed to low possibility of occurrence of protests. On the contrary, it was found that urban development resulted into the likelihood of regime failure and few anti-state protests (Ikein 2008, p.87).

Oil rich countries, on the other hand, experience high levels of protests, but low likelihood of regime failure, and the likelihood of existence of civil wars is low as well (Lewington 1991, p.17). In Nigeria, there have been social protests from the public due to mismanagement of oil resources in the allocation of funds in the national budget by top politicians.

Conclusion and Recommendations

This article provides a better understanding of the relationship between oil wealth and democracy in developing countries. Despite the fact that this article may not explain fully the effects of oil wealth on democracy, there are still some unfound evidence that oil contributes negatively towards political democracy and perpetuation of authoritarian rule. These undemocratic impacts have grown tremendously to the extent that they are of no impact in certain states, such as Latin America.

The explanation of why oil contributes negatively towards de-democratization is not easy and there is no strong evidence to explain each variable. The only impact that is well understood is the Rentier effect that is widely agreed on by many public viewers. This examination may only be the source of the deeper analysis of the effects of oil wealth on democracy and the types of regimes that exist in those states. This article only tries to give us a quick snapshot of the consequences of oil wealth dependence on democracy. However, the effects of oil wealth dependence vary widely from one region to another, and the ability to determine these conditions depends on the extent of research that has been conducted. Therefore, in order to understand the effects of various government incomes from oil exportation on democracy, the interrelationship between oil dependence and democracy, their consequences on economic improvement and conflict among the natives, as well as the policy mitigation measures, could be applied to assist countries to prevent a curse because of resources such as oil.