On Planet Money’s “just give the oil money away” report

Photo by Jonathan Wheeler. Used with a Creative Commons license.

My favorite podcast, Planet Money, had a great report last week on a novel idea for avoiding the resource curse: just give the revenues away to a country’s citizens. The report was prompted by the announcement of huge deposits of precious minerals in Afghanistan and the discovery of oil in the last couple of years in Ghana — a country that desperately wants to avoid having its economy or government end up anything like Nigeria‘s, where there’s been a decades-long oil bonanza.

It’s easy to see the potential benefits of giving money away to poor people, if you’re at all sympathetic to the idea that welfare systems work to stimulate economies. Giving disposable income to people with pressing needs is great for boosting a country’s economic growth — a poor person who gets $100 will immediately inject it back into the economy by spending it on pressing needs, whereas a rich person might stick it in a savings account. Also, individuals may be better suited to decide what their needs are — and use money for innovative ventures — than bureaucracies, NGOs and government contractors (who might very well have corrupt relationships with those handing out the contracts).

But as you’ll see when you listen to the podcast, the idea is incomplete. Probably the biggest flaw is the fact that there are many collective ventures — schools, roads, hospitals — that individuals are in no position to take on, no matter how much extra income they have. (The advocates of the system would tax the transfers to pay for this, but it doesn’t seem like enough.)

Still, it’s funny to hear a Nigerian oil official in the podcast claim that individuals would do a bad job of allocating their payouts — it’s hard to imagine the situation getting much worse than it is when it comes to squandering the Delta’s riches.

It seems to me there’s a strong argument for having a big portion of oil revenues — but not all — earmarked for cash transfers. Whatever the solution to ending the resource curse and improving revenue transparency in extractive industries around the world, one important element is going to be getting more good journalism like Planet Money’s — but even more from local media — on the topic. Once again, I will shamelessly plug the report I wrote with several classmates on this subject: There Will Be Ink. Great title, huh?

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