“A better narrative”

Natural resources often prove a curse for a country. Elites exploit the wealth without paying attention to people’s needs. They have no incentive to allow their nation’s human resources to develop. Oxford economist Paul Collier argues that there is an alternative to plunder.

Interview with Paul Collier

What can be done about the resource curse?
Well, there are powerful forces at work. And yes, we often see history repeat itself. However, there is no reason why history must repeat itself. It is absolutely possible to learn from experience, as the example of your country, Germany, shows. Today, your economy is the best-run economy in Europe. And the reason is that it was once the worst run. After hyperinflation a few generations ago, Germans decided “never again”.

But can African countries simply say “never again” to resource-fuelled violence?
It is certainly not easy, but nonetheless it is starting to happen. Three things matter in particular:
– Countries need good rules on how to take decisions, and it is a good thing that more African countries are enforcing some kind of constitutional order than ever before.
– On that base, good rules must be passed for resource management. Ghana’s recently passed law, according to which 30 % of resource revenues must serve the national interest, makes sense for instance.
– Finally, ordinary people need to understand the issues so they become interested in defending a healthy institutional framework. An active citizenry can and must put a check on those in power.
So yes, there is a way to stop the plunder, just like Germany eventually introduced an independent central bank to prevent inflation. Obviously, another kind of institution is needed to stop plunder.

Are you thinking of sovereign wealth funds?
No, that is the wrong kind of institution. Investing resource revenue in capital assets abroad makes sense for a capital-intensive economy like Norway, but most African economies need a lot of capital themselves. So they need something like sovereign investment funds, institutions that contribute to building infrastructure, raising education levels and so on. To the extent that such investments are impossible at any given time, such institutions need the freedom to invest abroad, but the default option must be to invest at home.

Is there something like a roadmap for building the right kind of institutions?
Yes, there is. The Natural Resources Charter spells out the right kind of principles. I find it quite promising that the AU’s New Partnership of African Development – NEPAD for short – has adopted the Charter as a flagship programme and is preparing a capacity building programme in its support. Tanazania’s government, for instance, is interested in such capacity building because it understands that resource management really matters very much.

How does the Natural Resources Charter relate to EITI, the Extractive Industries Transparency Initiative?
Unless there is transparency in resource extraction, there will be plunder. So EITI is the place to start. But EITI is not enough; one needs to build institutions that drive development.

A few countries obviously have that kind of institutions. Botswana, for instance, has made prudent use of its natural resources ever since becoming independent. What went right there?
Botswana was lucky to have good leaders early on. They had a healthy vision and established a political culture that is geared to people’s welfare. It probably helped that Botswana is a semi-arid country. It has traditions of managing resources prudently.

But isn’t Sudan, where oil wealth has repeatedly been the cause of violence, a semi-arid country too? It does not seem to have a tradition of prudent resource management.
No, it does not, and the outlook is really gloomy at the moment. Perhaps things would have been different had John Garang, the leader of South Sudan’s independence movement, lived. He was a man of vision. Unfortunately, he died in a helicopter crash in 2005. War looks imminent now, and one can only hope that violence will eventually result in some kind of opportunity to re-start. There is really a lot that can go wrong, generally speaking. In Kenya, for instance, they just discovered oil, and the first response was an immediate populist demand for public-sector wages to rise. The short-sighted idea is that there is new-found wealth which can be consumed. The prudent idea, in contrast, would be to invest in a better future.

How will that happen?
There is a need for a different and better narrative. Leaders must tell their people: “This is our opportunity, let’s not waste it. It is our responsibility to make things better and prevent unrest.” Many leaders mistakenly believe their job is to take decisions, even though technocrats are better at doing that. In truth, leaders’ job is to communicate a viable narrative.

So if leaders are no good, there will be no sense of “never again”?
Well, change can be introduced bottom-up too. After the youth-led revolutions in Tunisia, Egypt and Libya, governments all over Africa are afraid of their young people. There is a lot of public agitation. Many people understand that things must not go on as they did in the past. And such agitation can be – and often is – supported by think tanks or newspapers. Economic reporting has improved quite a bit in Africa, and that helps to educate the public about opportunities and dangers.

But protests can easily become populist. At the beginning of this year, the Nigerian government announced it would abolish costly petrol subsidies. There was a massive protest movement, and in the end the subsidies were only cut in half. What is your take on the matter?
No economist on Earth would argue that it makes sense for Nigeria to produce and export oil, import refined petrol, spend tax money on making that commodity cheaper and watch criminals get rich by re-exporting subsidised petrol. The government, no doubt, was right to try to discontinue this crazy scheme, which really looks like god’s gift to crooks.

But it did not manage to do so. What went wrong?
In my view, there were three problems:
– The crooks did not like the new policy, and they orchestrated protests. Crooks, mind you, tend to be clever and well-connected.
– Many people were honestly upset about having to pay more for fuel.
– Most important, however, most people did not trust the government to spend money well. Nigerian authorities don’t have a good reputation, and over the past decades, their track record really was not good. Therefore the government would have been well advised to shore up its reputation before the reform.

So the chance for a new narrative was missed in Nigeria?
No, not necessarily. Actually, I’m quite optimistic about this country. After the protests, President Goodluck Jonathan made Nuhu Ribadu the chairman of the Petroleum Revenue Task Force. This step was very important. Ribadu has a strong track record of fighting corruption, and he was a candidate in the last presidential election. By reaching out to this former opponent, Jonathan proved that he is serious about good governance. And it is good that Ribadu assumed responsibility under a head of state he opposed in the elections. He could have sat back and enjoyed the government’s problems. Instead, he chose to serve the nation. Jonathan’s economic team, led by Finance Minister Ngozi Okonjo-Iweala, moreover, is reform-minded, and so are some of the state governors. All in all, it is good that Nigeria’s citizenry is aroused. People are no longer prepared to suffer in silence. I certainly see scope for a new narrative and meaningful change in the medium run.

How do you assess Liberia and Sierra Leone, two countries that suffered decades of strife fuelled by “blood diamonds”?
Both countries have good people in government today; both presidents are impressive. Nonetheless, things are not moving ahead as fast as the leaders certainly aspire. There are many serious challenges, and one of them is that these societies are quite small. Unlike Nigeria, they do not have many capable civil servants. As I pointed out before, NEPAD recognises the need for capacity development, and I think this is an excellent opportunity for Germany, which so far stayed aloof from the Natural Resources Charter, to get involved. German support for capacity building in this field would be most meaningful. After all, the most important challenge in Africa today is to get resource policies right. If that happens, there will be real progress. Otherwise, the plunder will go on.

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