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Does Oil Hinder Democracy?

  • Michael L. Ross (a1)
Abstract

Some scholars suggest that the Middle East's oil wealth helps explain its failure to democratize. This article examines three aspects of this “oil impedes democracy” claim. First, is it true? Does oil have a consistendy antidemocratic effect on states, once other factors are accounted for? Second, can this claim be generalized? Is it true only in the Middle East or elsewhere as well? Is it true for other types of mineral wealth and other types of commodity wealth or only for oil? Finally, if oil does have antidemocratic properties, what is the causal mechanism?

The author uses pooled time-series cross-national data from 113 states between 1971 and 1997 to show that oil exports are strongly associated with authoritarian rule; that this effect is not limited to the Middle East; and that other types of mineral exports have a similar antidemocratic effect, while other types of commodity exports do not.

The author also tests three explanations for this pattern: a “rentier effect,” which suggests that resource-rich governments use low tax rates and patronage to dampen democratic pressures; a “repression effect,” which holds that resource wealth enables governments to strengthen their internal security forces and hence repress popular movements; and a “modernization effect,” which implies that growth that is based on the export of oil and minerals will fail to bring about die social and cultural changes that tend to produce democratic government. He finds at least limited support for all three effects.

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1 See, for example, O'Donnell, Guillermo, Schmitter, Philippe C., and Whitehead, Lawrence, eds., Transitions from Authoritarian Rule: Prospects for Democracy (Baltimore: Johns Hopkins University Press, 1986); Larry Diamond, D., Linz, Juan J., and Lipset, Seymour Martin, eds., Democracy in Developing Countries (Boulder, Colo.: Lynne Rienner, 1988); Inglehart, Ronald, Modernization and Postmodernization (Princeton: Princeton University Press, 1997).

2 Przeworski, Adam and Limongi, Fernando, “Modernization: Theories and Facts,World Politics 49 (January 1997); Przeworski, Adam, Alvarez, Michael, Cheibub, José Antonio, and Limongi, Fernando, “What Makes Democracies Endure?Journal of Democracy 7 (January 1996); idem, Democracy and Development: Political Institutions and Well-Being in the World, 1950–1990 (New York: Cambridge University Press, 2000).

3 Sachs, Jeffrey D. and Warner, Andrew M., “Natural Resource Abundance and Economic Growth,” Development Discussion Paper no. 517a (Cambridge: Harvard Institute for International Development, 1995); idem, “The Big Push, Natural Resource Booms and Growth,” Journal of Development Economics 59 (February 1999); Leite, Carlos and Weidmann, Jens, “Does Mother Nature Corrupt? Natural Resources, Corruption, and Economic Growth,” IMF Working Paper, WP/99/85 (1999); Ross, Michael L., “The Political Economy of the Resource Curse,World Politics 51 (January 1999); Auty, R. M., Resource Abundance and Economic Development (Oxford: Oxford University Press, 2001).

4 Collier, Paul and Hoerfier, Anke, “On Economic Causes of Civil War,Oxford Economic Papers 50 (October 1998); Soysa, Indra de, “The Resource Curse: Are Civil Wars Driven by Rapacity or Paucity?” in Berdal, Mats and Malone, David M., eds., Greed and Grievance: Economic Agendas in Civil Wars (Boulder, Colo.: Lynne Rienner, 2000).

5 Throughout this article I use the term “Middle East” to include North Africa. I adopt the World Bank's definition of this region: Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Malta, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates, and Yemen.

6 According to Lenin, “The rentier state is a state of parasitic, decaying capitalism, and this circumstance cannot fail to influence all the socio-political conditions of the countries concerned.” Lenin, V. I., “Imperialism, the Highest Stage of Capitalism,” in Tucker, Robert C., ed., The Lenin Anthology (New YorkW. W. Norton, 1975).

7 Mahdavy, Hussein, “The Patterns and Problems of Economic Development in Rentier States: The Case of Iran,” in Cook, M. A., ed., Studies in Economic History of the Middle East (London: Oxford University Press, 1970), 428.

8 Hazem Beblawi, “The Rentier State in the Arab World,” in Beblawi, Hazem and Luciani, Giacomo, eds., The Rentier State (New York: Croom Helm, 1987), 51. Note that this definition excludes workers' remittances. As Chaudhry notes, large flows of remittances have different political implications than do large oil rents. See Chaudhry, Kiren Aziz, The Price of Wealth: Economies and Institutions in the Middle East (Ithaca, N.Y.: Cornell University Press, 1997).

9 Anderson, Lisa, “The State in the Middle East and North Africa,Comparative Politics 20 (October 1987), 9.

10 Huntington, Samuel P., The Third Wave: Democratization in the Late Twentieth Century (Norman: University of Oklahoma Press, 1991), 3132.

11 See, for example, Törnquist, Olle, “Rent Capitalism, State, and Democracy: A Theoretical Proposition,” in Budiman, Arief, ed., State and Civil Society in Indonesia, Monash Papers on Southeast Asia, no. 22 (1990); Yates, Douglas A., The Rentier State in Africa: Oil Rent Dependency and Neocolonialism in the Republic of Gabon (Trenton, N.J.: Africa World Press, 1996); Karl, Terry Lynn, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley: University of California Press, 1997); Clark, John, “Petro-Politics in Congo,Journal of Democracy 8 (July 1997); idem, “The Nature and Evolution of the State in Zaire,” Studies in Comparative International Development 32 (Winter 1998).

12 See Przeworski et al. (fn. 2, 2000), 77.

13 Barro, Robert J., “Determinants of Democracy,Journal of Political Economy 107 (December 1999).

14 Okruhlik, Gwenn, “Rentier Wealth, Unruly Law, and the Rise of Opposition,Comparative Politics 31 (April 1999), 308.

15 Note that, by contrast, dependency theory suggests that developing states are politically constrained by their reliance on the export of all types of primary commodities to advanced industrialized states. See, for example, Cardoso, Fernando Henrique and Faletto, Enzo, Dependency and Development in Latin America (Berkeley: University of California Press, 1979); Evans, Peter, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil (Princeton: Princeton University Press, 1979); Bollen, Kenneth A., “World System Position, Dependency, and Democracy: The Cross-National Evidence,” American Sociological Review 48 (August 1983).

16 Perhaps they have thought about it too carefully. Chaudhry (fn. 8), notes that “theories of the rentier state far outstrip detailed empirical analysis of actual cases” (p. 187).

17 Case studies often conflate these three effects. I treat them here as separate mechanisms to clarify their logic.

18 Luciani, Giacomo, “Allocation vs. Production States: A Theoretical Framework,” in Beblawi and Luciani (fn. 8).

19 Tilly, Charles, ed., The Formation of National States in Western Europe (Princeton: Princeton University Press, 1975); Bates, Robert and Lien, Da-Hsiang Donald, “A Note on Taxation, Development, and Representative Government,Politics and Society 14 (January 1985); Hoffman, Philip T. and Norberg, Kathryn, eds., Fiscal Crises, Liberty, and Representative Government, 1450–1789 (Stanford, Calif.: Stanford University Press, 1994).

20 Crystal, Jill, Oil and Politics in the Gulf: Rulers and Merchants in Kuwait and Qatar (New York: Cambridge University Press, 1990).

21 Brand, Laurie A., “Economic and Political Liberalization in a Rentier Economy: The Case of the Hashemite Kingdom of Jordan,” in Harik, Iliya and Sullivan, Denis J., eds., Privatization and Liberalization in the Middle East (Bloomington: Indiana University Press, 1992).

22 Waterbury, John, “Democracy without Democrats? The Potential for Political Liberalization in the Middle East,” in Salamé, Ghassan, ed., Democracy without Democrats? The Renewal of Politics in the Muslim World (New YorkI. B. Tauris, 1994), 29.

23 Lam and Wantchekon develop a formal model that makes a similar point, that resource wealth can impede democracy by enhancing the distributive influence of an elite. Lam, Ricky and Wantchekon, Leonard, “Dictatorships as a Political Dutch Disease” (Manuscript, Department of Political Science, Yale University, January 1999).

24 Entelis, John P., “Oil Wealth and the Prospects for Democratization in the Arabian Peninsula: The Case of Saudi Arabia,” in Sherbiny, Naiem A. and Tessler, Mark A., eds., Arab Oil: Impact on the Arab Countries and Global Implications (New York: Praeger, 1976).

25 Vandewalle, Dirk, Libya since Independence: Oil and State-Building (Ithaca, N.Y.: Cornell University Press, 1998).

26 Bazresch, Carlos and Levy, Santiago, “Populism and Economic Policy in Mexico, 1970–82,” in Dornbusch, Rudiger and Edwards, Sebastian, eds., The Macroeconomics of Populism in Latin America (Chicago: University of Chicago Press, 1991); Kessler, Timothy P., Global Capital and National Politics: Reforming Mexico's Financial System (Westport, Conn.: Praeger, 1999).

27 Anderson, Lisa, “Peace and Democracy in the Middle East: The Constraints of Soft Budgets,Journal of International Affairs 49 (Summer 1995).

28 Moore, Barrington, Social Origins of Dictatorship and Democracy (Boston: Beacon Press, 1966).

29 On Algeria, see Moore, Clement Henry, “Petroleum and Political Development in the Maghreb,” in Sherbiny and Tessler (fn. 24); on Libya, see First, Ruth, “Libya: Class and State in an Oil Economy,” in Nore, Petter and Turner, Terisa, eds., Oil and Class Struggle (London: Zed Press, 1980); also on Libya, see Vandewalle (fn. 25); on Tunisia, see Bellin, EvaThe Politics of Profit in Tunisia: Utility of the Rentier Paradigm?World Development 22 (March 1994); and on Iran, see Shambayati, Hootan, “The Rentier State, Interest Groups, and the Paradox of Autonomy: State and Business in Turkey and Iran,Comparative Politics 26 (April 1994).

30 Putnam, Robert, Making Democracy Work: Civic Traditions in Modern Italy (Princeton: Princeton University Press, 1993).

31 On Algeria, see Entelis, John P., “Civil Society and the Authoritarian Temptation in Algerian Politics,” in Norton, Augustus Richard, ed., Civil Society in the Middle East, vol. 2 (Leiden: E. J. Brill, 1995); on Iran, see Farhad Kazemi, “Civil Society and Iranian Politics,” in Norton; on the Gulf states, see Jill Crystal, “Civil Society in the Arab Gulf States,” in Norton; on Iraq, see Humadi, Zuhair, “Civil Society under the Ba'th in Iraq,” in Schwedler, Jillian, ed., Toward Civil Society in the Middle East? (Boulder, Colo.: Lynne Rienner, 1995). Other scholars have argued that the weakness of civil society in the Middle East has hampered a transition to democracy, without suggesting that oil wealth is the source of this weakness.

32 First (fn. 29), 137.

33 Chaudhry, Kiren Aziz, “Economic Liberalization and the Lineages of the Rentier State,Comparative Politics 27 (October 1994), 9.

34 Skocpol, Theda, “Rentier State and Shi'a Islam in the Iranian Revolution,Theory and Society 11 (April 1982).

35 Clark (fn. 11, 1997).

36 Gregory Gause, F. II, “Regional Influences on Experiments in Political Liberalization in the Arab World,” in Brynen, Rex, Korany, Bahgat, and Noble, Paul, eds., Political Liberalization and Democratization in the Arab World, vol. 1, Theoretical Perspectives (Boulder, Colo.: Lynne Rienner, 1995).

37 See Collier and Hoeffler (fn. 4); de Soysa (fn. 4).

38 Seymour Lipset, Martin, “Some Social Requisites of Democracy: Economic Development and Political Legitimacy,American Political Science Review 53 (March 1959); Deutsch, Karl W., “Social Mobilization and Political Development,” American Political Science Revieta 55 (September 1961); Inglehart (fn. 1).

39 Inglehart (fn. 1), 163.

40 Ibid., 161.

41 A fourth explanation has been offered by U.S. vice president Richard Cheney, a political scientist by training: “The problem is that the good Lord didn't see fit to put oil and gas reserves where there are democratic governments.” Cited in Ignatius, David, “Oil and Politics Mix Suspiciously Well in America,” Washington Post, July 30, 2000, A31.

42 Each of the variables is defined more precisely in Appendix 1. Gurr, Ted R. and Jaggers, Keith, “Polity 98: Regime Characteristics, 1800–1998,” http://www.bsos.umd.edu/cidcm/polity/, 1999 (consulted March 1, 2000).

43 Here I am following the practice of Londregan, John B. and Poole, Keith T., “Does High Income Promote Democracy?World Politics 49 (October 1996).

44 Oil and Minerals are similar to the indicators used by Sachs and Warner (fn. 3, 1995) and by Leite and Weidmann (fn. 3) in their studies of the influence of resource wealth on economic performance. While Sachs and Warner combine fuels, nonfuel minerals, and agricultural goods into a single variable, I consider them as separate variables to see if their regression coefficients (and hence their influence on regime types) differ.

43 Lipset (fn. 38); Burkhart, Ross E. and Lewis-Beck, Michael S.Comparative Democracy: The Economic Development Thesis,” American Political Science Review 88 (December 1994); Londregan and Poole (fn. 43); Przeworski and Limongi (fn. 2); Barro (fn. 13).

46 In virtually all cases, the figure for 1980 (the only other year for which data were available) was identical to the 1970 figure.

47 Salamé (fn. 22); Lipset, Seymour Martin, “The Social Requisites of Democracy Revisited,American Sociological Review 59 (February 1994); Midlarsky, Manus, “Democracy and Islam: Implications for Civilizational Conflict and the Democratic Peace,” International Studies Quarterly 42 (December 1998).

48 Barro (fn. 13). Observers offer different arguments to explain the negative correlation between democracy and Islamic populations (−.38). See, for example, Sharabi, Hisham, Neopatriarchy: A Theory of Distorted Change in Arab Society (New York: Oxford University Press, 1988); Lewis, Bernard, “Islam and Liberal Democracy,Atlantic Monthly 271 (February 1993); and Michael Hudson, “The Political Culture Approach to Arab Democratization: The Case for Bringing It Back In, Carefully,” in Brynen, Korany, and Noble (fn. 36). Although they are negatively correlated for the period covered by this data set (1971–97), it is not obvious that they will continue to be negatively correlated in the future. Two states with large Islamic populations, Nigeria and Indonesia, have recendy moved toward democracy, and some of the most important prodemocracy forces in other Islamic states (including Algeria, Egypt, Jordan, and Malaysia) are often classified as Islamic “traditionalists” or “fundamentalists.” It is instructive to recall that until the “third wave” of democratization began in the mid-1970s, democracy and Catholicism were negatively correlated.

49 See Burkhart and Lewis-Beck (fn. 45); Londregan and Poole (fn. 43); Przeworski and Limongi (fn. 2).

50 See Moore (fn. 28).

51 See Lipset (fn. 38); Huntington (fn. 10).

52 See Dahl, Robert A., Polyarchy: Participation and Opposition (New Haven: Yale University Press, 1971).

53 See Wallerstein, Immanuel, The Modern World-System (New York: Academic Press, 1974); Bollen (fn. 15); Burkhart and Lewis-Beck (fn. 45).

54 Stimson, James A., “Regression in Space and Time: A Statistical Essay,” American Journal of Politicai Science 29 (November 1985); Beck, Nathaniel and Katz, Jonathan N., “What to Do (and Not to Do) with Time-Series Cross-Section Data,” American Political Science Review 89 (September 1995).

55 Beck and Katz (fn. 54) recommend using ordinary least squares with “panel-corrected standard errors” when working with panel data if the number of units is less than the number of time points. In this data set the number of units (113) exceeds the number of time points (27).

56 Achen, Christopher H., “Why Lagged Dependent Variables Can Suppress the Explanatory Power of Other Independent Variables” (Paper presented at the annual meeting of the Political Methodology Section of the American Political Science Association, Los Angeles, July 20–22, 2000).

57 Most of the coefficients for the year dummies ate also significant: for years 1971–89 the coefficients are negative and range from marginally to highly significant; for 1990 the coefficient is negative but not significant, and for years 1991–96 the coefficients are positive, although all but one (1994) are not significant.

58 These results were unaffected by the inclusion of other variables that are sometimes significant in democracy regressions, including educational attainment, status as a former British colony, Catholic population, and trade openness. Only the last variable was significant. When run with a random-effects process, a Hausman test produces a chi2 of 466 and a P value of 0.000. When run with a fixed-effects process, however, none of the right-hand-side variables—except for the lagged dependent variable and Log Income—are significant.

59 These effects occur because Income is entered in the model as a logarithmic function and because an oil discovery will influence both the numerator and the denominator in the Oil variable.

60 See Achen (fn. 56).

61 Summers, Robert and Heston, Alan, “Penn World Tables, Version 5.6,” http://cansim.epas.utoronto.ca;5680/pwt/pwt.htm/, 1999 (consulted March 1, 2000).

62 Of course, a larger budget may not be the only cause of such government actions, but it is the only cause that can be linked to resource wealth in an obvious way.

63 The Minerals variable is not significant in this sample, making it difficult to draw inferences about the mineral-exporting states.

64 Note that other studies have found that a government's reliance on personal and corporate tax revenues is strongly and negatively influenced by per capita income: poor states tend to rely on trade taxes, rich ones on personal and corporate taxes. See Easterly, William and Rebelo, Sergio, “Fiscal Policy and Economic Growth,Journal of Monetary Economics 32 (December 1993); Zee, Howell H., “Empirics of Cross-Country Tax Revenue Comparisons,” World Development 24 (October 1996). Since percapita income is included in the model, the actual effect of Taxes on regime types is probably larger than the coefficient in this regression suggests.

65 Brown, David S. and Hunter, Wendy, “Democracy and Social Spending in Latin America, 1980–92,American Political Science Review 93 (December 1999).

66 Since the data cover only eleven years, the maximum number of possible observations for these regressions drops from 3,752 to 1,642.

67 Lerner, Daniel, The Passing of Traditional Society (New YorkFree Press, 1958); Deutsch (fn. 38).

68 Inglehart (fn. 1).

69 Lipset (fn. 38).

70 Neither Oil nor Minerals is significantly correlated with democracy in these reduced samples, which makes it hard to be confident about these results. When Oil and Minerals are regressed on each of the four variables for occupational specialization (with Income and Islam included as control variables), the results are mixed: Oil is negatively correlated with Men in Industry but positively correlated with Women in Industry; Minerals is not significantly correlated with Men in Industry and is negatively, but weakly, linked to Women in Industry.

71 Unless otherwise indicated, the data below were derived from World Bank, “World Development Indicators,” CD-ROM (Washington, D.C.: World Bank, 1999).

72 Gurr and Jaggers (fn. 42)

73 Londregan and Poole (fn. 43).

74 Summers and Heston (fn. 61).

75 Sachs and Warner (fn. 3, 1999).

77 Barrett, David B, ed., World Christian Encyclopedia (New YorkOxford University Press, 1982).

* Previous versions of this article were presented to seminars at Princeton University, Yale University, and the University of California, Los Angeles, and at the September 2000 annual meeting of the American Political Science Association in Washington, D.C. For their thoughtful comments on earlier drafts, I am grateful to Pradeep Chhibber, Indra de Soysa, Geoffrey Garrett, Phil Keefer, Steve Knack, Miriam Lowi, Ellen Lust-Okar, Lant Pritchett, Nicholas Sambanis, Jennifer Widner, Michael Woolcock, and three anonymous reviewers. I owe special thanks to Irfan Nooruddin for his research assistance and advice and to Colin Xu for his help with the Stata. I wrote this article while I was a visiting scholar at The World Bank in Washington, D.C. The views I express in this article, and all remaining errors, are mine alone.

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