globalization and the politics of natural resources

http://cps.sagepub.com/Comparative Political Studies

http://cps.sagepub.com/content/44/6/639The online version of this article can be found at:

DOI: 10.1177/0010414011401207

2011 2011 44: 639 originally published online 18 AprilComparative Political Studies

Nita Rudra and Nathan M. JensenGlobalization and the Politics of Natural Resources

Published by:

http://www.sagepublications.com

can be found at:Comparative Political StudiesAdditional services and information for

http://cps.sagepub.com/cgi/alertsEmail Alerts:

http://cps.sagepub.com/subscriptionsSubscriptions:

http://www.sagepub.com/journalsReprints.navReprints:

http://www.sagepub.com/journalsPermissions.navPermissions:

http://cps.sagepub.com/content/44/6/639.refs.htmlCitations:

What is This?

- Apr 18, 2011 OnlineFirst Version of Record

- May 16, 2011Version of Record >>

at TEXAS SOUTHERN UNIVERSITY on November 8, 2014cps.sagepub.comDownloaded from at TEXAS SOUTHERN UNIVERSITY on November 8, 2014cps.sagepub.comDownloaded from

http://cps.sagepub.com/

http://cps.sagepub.com/content/44/6/639

http://www.sagepublications.com

http://cps.sagepub.com/cgi/alerts

http://cps.sagepub.com/subscriptions

http://www.sagepub.com/journalsReprints.nav

http://www.sagepub.com/journalsPermissions.nav

http://cps.sagepub.com/content/44/6/639.refs.html

http://cps.sagepub.com/content/44/6/639.full.pdf

http://cps.sagepub.com/content/early/2011/04/13/0010414011401207.full.pdf

http://online.sagepub.com/site/sphelp/vorhelp.xhtml



Articles

Comparative Political Studies44(6) 639 –661© The Author(s) 2011Reprints and permission: http://www. sagepub.com/journalsPermissions.navDOI: 10.1177/0010414011401207http://cps.sagepub.com

Globalization and the Politics of Natural Resources

Nita Rudra1 andNathan M. Jensen2

Abstract

Much political science scholarship, including important work in this journal, has explored the implications of natural resource endowments—particularly oil and other highly valuable export commodities—on political and economic outcomes. Although the first wave of literature emphasized the negative effects of these resources, more recent work emphasizes how domestic institutions can condition the relationship, sometimes leading to positive effects. In this special issue, the authors expand this literature in two important ways. First, they renew attention on the international dimensions of this relationship, exploring how trade, migration, foreign investment, and other global forces influence the effects these resources have on countries. Second, they link the study of the globalization–natural resources nexus to broader debates in international and comparative political economy, such as how domestic institutions shape the impact of globalization and how economic factors affect the political survival of regimes and individual leaders. The five studies in this collection use a variety of research methodologies (formal models, country case studies, and large-N empirical analyses) to examine several different international economic factors linking resources with politics. The findings provide new insights into the politics of natural resources, expand the traditional focus of the resource curse literature to

1University of Pittsburgh, Pittsburgh, PA, USA2Washington University in St. Louis, St. Louis, MO, USA

Corresponding Author:Nita Rudra, University of Pittsburgh, Graduate School of Public and International Affairs, 3221 Posvar Hall, Pittsburgh PA 15260Email: [email protected]

at TEXAS SOUTHERN UNIVERSITY on November 8, 2014cps.sagepub.comDownloaded from


640 Comparative Political Studies 44(6)

include other natural resources (e.g., water), and shed light on whether globalization has the ability to improve natural resource governance around the world.

Keywords

natural resources, globalization, domestic institutions, resource curse, democracy, water

Globalization and Natural Resources: Puzzles and Opportunities

Scores of scholars, journalists, and antiglobalization activists claim that the acceleration of global economic activity is putting great pressure on natural resources.1 Much of their concern is based on the growing participation of emerging nations—such as China and India—in global markets and the strain that the subsequent rise in global demand for commodities puts on the earth’s resources. Indeed, experts predict that the supplies of many of the world’s nonrenewable natural resources could reach their peak in the next 20 to 30 years and decline thereafter.2

The relationship between globalization and natural resources is of imme-diate interest to political science: The consequences for the distribution of power may be profound. Not only might leaders in resource-rich nations such as Libya, Venezuela, and Iran be emboldened by their control over these increasingly coveted resources, but also resource-dependent nations might find it more difficult to expand their global economic power and maintain domestic stability. Such power repercussions are part of why political scien-tists have been analyzing how nations utilize their natural resources. Most studies, however, have focused on how domestic factors enable countries (or not) to effectively harness resource wealth. It is striking that in the more recent literature, the international dimensions of this problem have been largely neglected.

Scholars in this special issue undertake one of the first efforts to systemati-cally investigate the relationship between (the current phase of) globalization and the governance of natural resources in developing economies. The “gov-ernance of natural resources” can be understood as the interactions among a (formal and informal) body of rules, processes, and traditions that determine how power and responsibilities are exercised, how decisions are made, and how or to what extent citizens or other stakeholders may have a say in the



Rudra and Jensen 641

management of natural resources (see Graham, Amos, & Plumptre, 2003). This definition purposefully reflects a broad notion of governance, allowing us to more fully capture the many angles of the globalization–natural resources relationship. With this definition in mind, we can begin to investigate how international market expansion affects the ways in which states extract and manage their natural resources as well as whether globalization influences the extent to which states use their natural resource wealth to respond (or not) to the needs of their citizens. We define globalization primarily in economic terms, referring specifically to the reduction of barriers between countries to facilitate the flow of goods, capital, services, and labor.3

Over the past few decades, most developing countries have become steadily more integrated into the global economy. International trade in both manu-factures and commodities has become substantially more important to most of these nations (see Figures 1 and 2).4 At the same time, they have become more open to international capital flows in general and foreign direct investment in particular (see Figure 2).5 For this special issue, it is particularly relevant that these trends toward increased openness have been especially evident in many fuel-rich developing countries, particularly after the early 1980s when many developing countries began opening their markets (see International

0

5

10

15

20

25

30

3519

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

05

% o

f GD

P

TotalCommoditiesManufacturesFuelNonfuel Commodities

Figure 1. Merchandise exports of developing countries (% of GDP)




Monetary Fund [IMF], 2008, and Figure 3). Finally, an often-neglected aspect of globalization—the mobility of labor—has also been on the rise since the early 1970s (see Figure 4).6 Expanding global opportunities have, in poor countries, created a labor force more eager to migrate and take advantage of these new possibilities (Castles & Miller, 2003; Hatton & Williamson, 2005).

Does globalization affect the governance of natural resources, and if so, how? Our goal in this issue is to set the foundations for a broader research agenda that encourages researchers to consider the role of the global econ-omy in analyses of the governance of natural resources. We begin with a basic assumption that international market pressures affect how states govern natural resources; hereby, we initiate the dialogue by exploring some of the implications of this assumption. We take the approach that globalization is unlikely to have a uniform effect on the governance of natural resources in all countries. Even if globalization is increasing the demand for natural resources, we expect national responses will vary according to, inter alia, the nature of a country’s domestic institutions.

We begin by drawing from the extant literatures in international political economy (IPE) and comparative political economy (CPE) that have shown how domestic political institutions can mitigate or condition the impacts of interna-tional markets.7 The inference is that the effect of international market expan-sion on resource governance will depend on how institutions filter the responses

0

10

20

30

40

50

60

70

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

% o

f GD

P, T

rade

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

% o

f GD

P, P

ortfo

lio E

quity

and

FDI N

et In

flow

s

Trade (Imports + Exports,% of GDP)Portfoilio Equity and FDINet Inflows (% of GDP)

Figure 2. Trade and capital inflows for developing countries




0

10

20

30

40

50

60

70

80

% o

f Mer

chan

dise

Exp

orts

Manufactures ExportsResource ExportsAgricultural Exports

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Figure 3. Breakdown of merchandise exports for fuel-rich, non–Organisation for Economic Co-operation and Development (OECD) countries

0.00E+00

5.00E+07

1.00E+08

1.50E+08

2.00E+08

2.50E+08

Number of interna�onalmigrants

20102000199019801970

Figure 4. Number of international migrants




of those whose preferences are changed as a result of globalization (see Frieden, 1991; Keohane & Milner, 1996; Morrison, 2011). We anticipate that globaliza-tion may or may not cause the governance of natural resources to improve, depending on the preexisting institutional context (e.g., the rule of law or the degree to which losers from openness can seek compensation).

Consistent with the extant literature on the resource curse, then, the major-ity of the articles in this special issue focus on how globalization affects resource-rich nations. As a significant point of departure, however, the clos-ing study in this collection encourages future research to expand the purview of this field to include analyses of how globalization affects the way political elites govern national resources that are not domestically abundant. Ques-tions of how governments manage resources that are (globally) diminishing have received remarkably little attention in political science.8 The worldwide water situation serves as a good example. Even though it is currently viewed by the United Nations and other international organizations as a “water crisis,” scholars in political science have still to ask how the global economy—as well as domestic politics—might have contributed to this problem. The nega-tive effects of globalization on scarce natural resources seem an obvious pos-sibility; as developing countries become more reliant on international markets for the sale of their products, demand for increasingly scarce raw materials (e.g., water) as inputs in the production process begins to rapidly increase. The questions then become if and how domestic institutions mitigate such negative pressures of globalization.

In short, this issue offers an initial exploration of the impact of globaliza-tion on natural resource governance. We explore theoretically and empiri-cally the extent to which openness affects the manner in which governments manage natural resource endowments. We focus on how globalization affects natural resource governance in resource-rich countries; and at the same time, we encourage scholars to analyze more broadly some of the dilemmas and opportunities created by economic openness in managing resources that are increasingly scarce in supply, such as water and arable land. Since the latter are critical inputs to basic survival and production, it is obvious that improve-ments in the governance of these natural resources may generate positive political and economic benefits for all nations.9

The International Dimensions of Natural Resource Governance

It is intriguing that so few social scientists in recent decades have engaged in rigorous analyses of how the dilemmas and opportunities created by the




current phase of globalization affect the governance of natural resources. Academics have not always neglected the role of international factors in assessing the prospects of resource governance. For example, in the 1950s and 1960s, the international economy was seen as the primary source of problems causing slow political and economic progress in countries depen-dent on primary commodities. Dependency theorists argued that primary commodity exporters would suffer from a secular decline in the terms of trade, which would widen the gap between rich, industrialized nations and poor, resource-exporting countries. Analysis of the “Dutch disease,” a term coined in 1977 during a natural gas boom in the Netherlands, identified how natural resource exports may lead to deindustrialization because of exchange rate appreciation. The revenue flows toward the booming natural resource sector tend to raise the real exchange rate, making the manufacturing sector less competitive (Davis, 1995; Prebisch, 1950; Sachs & Warner, 1995).

In more recent decades, the only comprehensive coverage of this field is found in a two-part anthology published in 1993, called The International Political Economy of Natural Resources (edited by Mark Zacher). Yet here again, despite the promise of the anthology’s title, even these articles focus most often on domestic-level outcomes or individual case studies. Further-more, many of the contributions were first published prior to the fall of the Berlin Wall and reflected cold war policy concerns and theoretical frame-works. A return to this topic is clearly in order. This issue not only brings a fresh look at these issues, taking into account current politico-economic con-cerns, but also incorporates lessons learned from the broader study of IPE in the past decades.

Scholars in this issue naturally turn to existing theoretical frameworks in CPE and IPE to generate expectations about how greater interdependence might affect resource governance. In doing so, the authors demonstrate how existing theories engender important debates regarding (a) whether global-ization creates incentives for domestic actors in resource-rich countries to change how they govern natural resource wealth, in both a political and eco-nomic sense,10 and (b) whether international market integration encourages countries—particularly resource-poor ones—to use their existing resource endowments more efficiently.

Our primary research question is, does globalization create incentives for domestic actors to use their natural resource wealth more effectively, and if so, how? Existing trade theories suggest that the answer is yes; globalization should have a positive effect on natural resource governance, ceteris pari-bus. The theory of comparative advantage, for example, predicts that spe-cializing in the development and production of locally abundant factors




of production will encourage productivity and growth (see Wibbels & Goldberg, 2010). Likewise, Stolper–Samuelson (1941) theory stipulates that an easing of barriers to trade will lead to higher demand for abundant factors of production, resulting in greater returns to this factor. In simple terms, globalization increases the returns to the abundant factor (e.g., labor in poor countries) and decreases the returns to the scarce factor (e.g., capital in poor countries). As this growth in the abundant factor generates spill-overs to other sectors, nations experience an increase in returns to a broad range of economic activities.

These theories predict that the flourishing sector exports products with the highest relative efficiency, given all the other products that could be pro-duced. The extraction and management of natural resources serving as inputs to the production process should thus improve with greater openness. Export-ing firms have an enhanced incentive to take measures that ensure continued access to the raw materials required—either directly or indirectly—in the production of goods and services. One obvious caveat is that processing nat-ural resources cheaply and efficiently may hinge on the availability of advanced technology. But in a world of rapid and cheap communication, ideas and information spread quickly. Indeed, “new” growth theories argue that trade and capital flows are associated with the spread of technological innovation (Romer, 1986). Countries benefit from the knowledge and tech-nology spillovers generated by increases in trade and capital flows (Grossman & Helpman, 1990); this, in turn, enables more efficient production processes and practices and eases the strain on natural resources.

For countries endowed with natural resources, recent trends suggest the exploitation of this factor is leading to economic booms, fueling GDP growth. These high returns to natural resource production may be more than just temporary surges because of spikes in global demand. The IMF (2008) states that the current commodity price boom is relatively unique in that it “has been more broad-based [including oil, metals, major food crops, and some beverages] and longer-lasting, and that prices have risen by more than usual” (p. 9).

In this issue we start with standard globalization theories and do not out of hand reject the IMF’s (2008) optimism that specialization in natural resource production could plausibly have long-lasting and positive economic effects. According to previous research, the wealth effect of successful trade, capital flows, and immigration can generate other public goods such as investment in infrastructure,11 education,12 and even positive political developments such as democracy.13 This is a significant departure from the literature on the “Dutch disease” in economics and studies identifying the “resource curse” in




political science, both of which have highlighted the negative consequences of natural resource exports.

Our first hypothesis is thus,

Hypothesis 1 (H1): Increasing trade, migration, and capital flows will promote efficiency and improve natural resource governance.

Critics, however, point out negative implications for natural resource exploita-tion in the globalizing environment. For example, as countries grow rich pursuing their comparative advantage, some scholars argue that the efforts to meet the rising consumption demands in both developing and developed countries are leading to the exploitation of natural resources in unsustainable ways (Korten, 2001; Zammit, 2003). Others claim that globalization encourages governments to favor exporters’ demands, leading to the support of industry at the expense of sustainability (Grimes & Kentor, 2003; López, 2003). In part, this is because the public good aspect of sustainability—or more specifically, the unhindered supply of raw materials—naturally creates incentives for shirking and collective action problems.

With respect to countries that have been pursuing their comparative advan-tage in natural resources, countless studies in political science have focused on even broader negative repercussions of this factor endowment. Domestic insti-tutions have often played a role in limiting economic growth and political progress.14 This resource curse has been associated with the emergence and survival of authoritarian regimes, economic underdevelopment, high levels of corruption, and political violence, all of which are reviewed in a number of the contributions to this special volume.15 In short, these studies suggest the larger population pays a heavy price for the abundance of natural resource wealth in their nations.

We thus take seriously the possibility that preexisting domestic institutions may ensure that the gains from trade, labor, and capital flows are captured by a small population of political and economic elites. Indeed, what has been largely ignored in international economic models is how increasing global demand for natural resources can have distributional consequences beyond those transmit-ted through the returns on factors of production. The broader literature in politi-cal science has recognized this tension and that the final economic and political outcomes ultimately depend on if and how domestic institutions mediate distri-butional conflicts caused by globalization. Research on the relationship between domestic political institutions and globalization has become one of the most vibrant in international relations and comparative politics.16 The majority of work in the discipline, such as Peter Katzenstein’s (1976) classic, argues that




domestic politics is essential for understanding foreign policy. These works are illustrative of the central importance of the interrelationship between domestic and international politics. Scholars exploring this nexus have presented con-vincing empirical evidence that in the presence of weak domestic political institutions, the positive impacts of globalization on political and economic outcomes do not hold (see, e.g., Ndulu, O’Connell, Bates, Collier, & Soludo, 2007; Rodrik, 1999; Rudra, 2008).

By the same logic, particular institutions can help ensure that the benefits of globalization are widely distributed. These studies dovetail with more recent analyses on the resource curse, which argue that some institutions can actually help ensure that abundant resources do not make their citizen’s worse off, such as those promoting “accountability and state competence”(see Robinson, Torvik and Verdier 2006, p.450).17 Cracks in the consensus of the resource curse literature are becoming more evident as select scholars find new evidence that resource-rich nations are not necessarily destined for poor economic and political development (Dunning, 2005, 2008; Morrison, 2009). Particular institutions are likely to be critical to determining the outcomes of increasing global demand for natural resources and the distributional con-flicts this may unleash (or exacerbate). Throughout this volume, the authors cite numerous recent studies that have taken seriously how resources can interact positively with domestic political and economic conditions.

We thus combine insights from this literature with the international eco-nomic theories reviewed above and propose our final hypothesis:

Hypothesis 2 (H2): Globalization will exacerbate challenges to natural resource governance in countries that lack institutions that promote political accountability and state competence.

This approach enables us to explore the extent to which international market expansion interacts with domestic institutions to affect the governance of natural resources. The challenge moving forward is to identify which preexisting domestic institutions are key to overcoming challenges to natural resource governance.

The Impacts of Globalization on the Governance of Natural ResourcesThe articles in this issue theoretically and empirically assess the hypotheses discussed above. To preview the findings, the majority of articles in this issue reject H1, that globalization directly improves national resource governance. Only Jensen and Johnston posit that globalization, specifically through the




pressures to attract foreign investment, can give political leaders the incentive to protect the rule of law. Yet they show that countries with rich natural resource endowments are more likely to renege on contracts and fail to uphold the rule of law. One article (Rudra) explicitly documents the negative correla-tion between trade flows and resource governance outcomes when domestic institutions are not taken into account. In direct contrast, all five works present some evidence in favor of H2 and reveal how particular domestic institutions condition the impacts of globalization on resource governance. Jensen and Johnston focus on the importance of the rule of law, whereas Bearce and Laks Hutnick focus on the redistributive strategies of authoritarian governments. Morrison and Rudra, in turn, center on the consequences of socioeconomic institutions being organized along class and ethnic lines. And finally, Brooks and Kurtz’s analysis suggests the critical importance of institutions that pro-mote human capital accumulation. This collection therefore unveils how national responses to globalization vary depending on a plethora of domestic institutions linked to greater (or lesser) transparency and accountability.

To elaborate, we start with the more specific question: can economic openness help mitigate the resource curse? Four articles in this special issue explore two dimensions of the resource curse, the political dimension (authoritarianism, the lack of rule of law, etc.) and the economic dimension (low economic growth). The general conclusion from the collection is that capital flows (Jensen and Johnston), trade revenues (Morrison), and migra-tion (Bearce and Laks Hutnick) ultimately exacerbate the political resource curse, but under certain circumstances, trade flows might be able to alleviate the economic resource curse (Brooks and Kurtz).

Jensen and Johnston’s analysis reveals how international capital flows can aggravate both the economic and political dimensions of the resource curse. They begin with a stylized fact: In an era of increasingly mobile capital, political elites in all countries have incentives to attract international capital. They argue that natural resources represent a lure for foreign investors and provide rulers with an incentive to neglect the rule of law and, thereby, weaken state accountability. Leaders in natural-resource-rich countries can expropriate from international investors and break contracts with firms with fewer economic repercussions than resource-poor countries. Thus, authori-tarian leaders are relatively insulated from backlashes from international capital markets. Jensen and Johnston’s develop a formal model of this rela-tionship between natural resources and the rule of law and test this model using a cross-sectional data set of country risk ratings from the political risk insurance industry. They find that countries with large natural resource endowments have dramatically higher levels of political risk. In general, this relationship among foreign investment, resources, and political incentives is




an alternative explanation for the weak rule of law in many resource-rich countries. One obvious implication of Jensen and Johnston’s finding on the correlation between capital flows and the weak rule of law in resource-rich countries is that economic growth (i.e., the economic resource curse) may also be adversely affected.

Focusing on a different feature of globalization—international labor mobility—Bearce and Laks Hutnick come to a similar conclusion regarding the negative effects of globalization on the political resource curse. Since many natural resource-dependent economies tend to be labor scarce, nations must “import” foreign labor to help develop their resource base. The problem, according to Bearce and Laks Hutnick, is that greater immigration makes democratization less likely. Building on the arguments of Acemoglu and Robinson (2000, 2001, 2006), Bearce and Laks Hutnick posit that the increase in the pool of labor leads to a credible threat of revolution, so that elites face potential challenges from a coalition of domestic and foreign workers. These credible challengers lead incumbents to provide levels of redistribution that co-opt the opposition and ultimately lower the chances for democratization. Using rigorous statistical analysis and a series of short case studies, Bearce and Laks Hutnick find empirical support for their theory that natural resources lead to dramatic inflows of immigrants (in labor scarce economies) and that this growing migrant population provides incentives for elites to redistribute and repress. They show that the countries that avoided the negative political consequences of natural resource endowments are countries that are not dependent on migration for the harnessing of their natural resources.

Like Bearce and Laks Hutnick, Morrison also suggests that globalization—in this case in the form of increasing trade revenues—can exacerbate the political resource curse, by giving leaders the means with which to buy off opposition groups. Building on his previous theoretical work, he closely examines the impact of globalization on Kenya and Mexico and explores how and why these two nations managed to maintain authoritarian regimes in certain periods. He argues that globalization dramatically affects the nontax revenues accruing to these states—for example, by increasing global demand for natural resources—and that leaders direct increased government revenue from trade toward restless groups to keep them from revolting. Exactly how and to whom the government directs the resources depend on existing socio-economic institutions; in the Mexican case, allocations have been along class lines, whereas in the Kenyan case, nontax revenues have been targeted to politically important ethnic groups. These different allocation patterns have had major implications: In Mexico, social spending rose substantially as non-tax revenue increased, but in Kenya social spending was unresponsive to




such changes. Ultimately, Morrison helps us understand how once positive shocks in the international environment occur, socioeconomic institutions condition the way in which leaders of resource-rich countries maintain authori-tarian control.

Brooks and Kurtz examine how the effects of globalization on the eco-nomic resource curse are conditioned by institutions that promote investment in human capital. In their analysis, the positive spillover effects of trade—the diffusion of advanced technology, in particular—can create incentives for the state to create linkages between the resource sector and the broader economy and improve both the quantity and quality of public good provision. The caveat is that countries must have preexisting investments in human capital. Mirroring some recent work on the positive impacts of trade and investment on economic growth, Brooks and Kurtz find that human capital stocks affect the relationship between globalization and natural resources. States will thereby have a necessary means to leverage natural resources wealth and induce the transfer of technology, create linkages between the resource sector and the broader economy, and improve the quantity and quality of public goods pro-vision. Economic outcomes further improve as globalization brings forth greater opportunities for the diffusion of advanced technology; deeper human capital stocks make it possible for the new technologies to be absorbed into local production processes with spillovers for the broader economy. In an empirical analysis of up to 98 countries from 1979 to 2000, Brooks and Kurtz find that natural resource production can generate higher levels of economic growth, but only in countries that have higher levels of human capital.

Domestic institutions similarly affect the governance of scarce natural resources. Rudra’s article directly addresses the question of whether global-ization creates incentives for domestic actors to more efficiently manage scarce resources. Although she focuses specifically on the effects of export pressure on potable water, she suggests that the logic of her analysis may be applied equally well to other scarce natural resources such as arable land, forests, and fisheries. Rudra hypothesizes that, in the absence of conflict-mediating domestic institutions, export pressures will have a negative effect on the availability of potable water. This is because most developing coun-tries tend to have a comparative advantage in exports that are highly water intensive (e.g., agriculture, textiles, iron, and steel). Expanding trade thus leads to more intense exploitation of this natural resource for two intercon-nected reasons: (a) exporters place great demands on existing water supplies, in terms of both use and wastewater discharge, and (b) governments are less apt to regulate industries because of the state’s growing reliance on foreign exchange. Statistical tests of her argument and case examples from India and




Vietnam support her predictions, lending credence to globalization’s critics who argue that openness encourages governments to favor the demands of capital over other interest groups. Yet despite this inherent tension between globalization and natural resources, Rudra argues that domestic politics can mitigate (or exacerbate) these effects. The impact of export pressures will be particularly acute in nations with great income disparity, since (as is clear from the political economy literature) highly unequal developing economies tend to be more divisive and have weak conflict-mediating institutions over-all. In contrast, more egalitarian societies may find it easier to mobilize and ensure access to safe water despite rapid expansion in international trade.

Broader Contributions and Moving ForwardIn sum, this special issue provides a diverse set of articles on the relationship between globalization and the governance of natural resources. The articles provide substantive contributions to literatures in comparative and interna-tional politics and make specific contributions to our understandings of the politics of natural resources, and particularly the resource “curse.” By incor-porating globalization into our analysis of natural resources, these articles offer new understandings of the relationship among politics, resource gover-nance, and economic openness. To begin, our findings support the studies in economics and political science that show that global market expansion can improve the well-being of citizens, provided that the requisite institutions are already in place. Yet our studies also take seriously the complex effects of globalization on the politics of natural resources and governance in general.

First, the central theme that emerges in this special issue is that domestic political variables mediate the impacts of globalization on natural resource management. The articles in this special issue explore this theme and identify how different types of institutions affect natural resource governance and mediate the impact of globalization. The institutions we focus on are differ-ent from the conventionally accepted “strong” domestic institutions such as democracy, organized labor movements, domestic courts, and a meritorious bureaucracy.

For example, both Rudra and Morrison suggest that socioeconomic institutions—specifically those related to ethnic diversity and income inequality—significantly condition how globalization affects the use of natu-ral resources and their revenues. Rudra finds that more homogenous nations may be in a better position to experience improvements in the governance of natural resources, whereas Morrison finds that the nature of heterogeneity in a country matters for how governments allocate their windfall gains. The




importance of these kinds of institutions has been largely ignored in studies of both globalization and the resource curse, and the works here suggest that further examination of their effects is warranted.

In a similar vein, Brooks and Kurtz argue that domestic institutions, spe-cifically the formation of human capital, are central to understanding the impact of globalization and natural resource production on economic growth. Preexisting stocks of human capital are key to ensuring that globalization will lead to good governance outcomes in research-rich countries. Their anal-ysis thus provides answers to why some governments avoid the “curse” of natu-ral resources, whereas others find that the exploitation of natural resources generates negative consequences for economic growth.18

Second, we specifically address how globalization can affect incentives of domestic actors in resource-rich countries. The analyses of Bearce and Laks Hutnick and Jensen and Johnston allow us to explore how national responses to economic openness might differ in resource-rich countries. Both studies examine how elites face distinct incentives in resource-rich nations, which condition their reaction to globalization. According to Bearce and Laks Hutnick, the immigration flows often associated with natural resource wealth can have perverse impacts on democratization by providing elites the incentives to co-opt citizens through redistribution. Jensen and Johnston contrast resource-rich and resource-poor countries by examining the incentives of elites in these two types of countries to uphold the rule of law in a global economy. Elites in resource-rich countries have less incentive to uphold the rule of law in efforts to facilitate investment. The extent of natural resource endowments in a country can thereby provide an insight into differences across countries in their level of bargaining power with foreign investors and, related, extent of political risk.

A third contribution is to encourage political science scholars—particularly scholars who focus primarily on resources that are domestically abundant (the resource curse)—to take scarce natural resources more seriously. Direct-ing attention to natural resources such as water is helpful to this debate because it represents a globally diminishing resource that is critical to (export) production and human life. Rudra’s analysis helps emphasize that the com-plex political battles that can emerge over natural resources—in response to economic openness, for example—are not limited to countries that are resource rich.19

Ultimately, this special issue represents a step forward in the broader pro-cess of exploring the relationship between economic openness and resource governance. We hope that the articles in these pages will convince scholars of the critical importance of this debate and encourage them to tackle the




many questions and puzzles that remain. We have included in this issue stud-ies that analyze the impacts of trade, international capital, and migration. But how might other international political and economic factors—such as inter-national organizations such as the World Bank, the IMF, or the United Nations—affect resource governance?

Many other questions remain. This collection only scratches the surface on how domestic institutions mediate the effects of globalization on natural resource governance. A much wider range of institutions can mediate this impact. Obvious candidates include electoral systems or variations in author-itarian regimes. Less obvious are recent nongovernmental organization activi-ties, such as the Extractive Industries Transparency Initiative, that focus on increasing transparency in the deals struck between international investors and domestic governments. Moreover, the studies in this issue focus primar-ily on natural resources such as oil and water. How might globalization affect other types of natural resources? Answering this question will lead to addi-tional testing and theoretical refinement about the globalization–resource governance nexus. Finally, how do natural resources affect international politics? How do they shape the incentives and ability to sign international trade and investment agreements, the forging of durable bilateral and regional economic treaties, or participation in the major multilateral organizations such as the World Trade Organization and the IMF? We hope this special issue helps to forward a research agenda that can address these important questions.

Acknowledgements

We would like to thank James Caporaso, Ronald Rogowski, Peter Rosendorf, and Dennis Quinn for their helpful comments. Special thanks to Benjamin Cohen and Kevin Morrison for their very detailed suggestions. We would also like to thank John Keeler and the Graduate School of Public and International Affairs for their generous support and encouragement for this project.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interests with respect to the authorship and/or publication of this article.

Funding

The author(s) received no financial support for the research and/or authorship of this article.

Notes

1. For examples, see McMichael et al. (1999), Schrecker (1997), Bijian (2005),




and Najam, Rummels, and Halle (2007). Examples from newspaper articles are Pope (1997), Sriprayoonskul (2000), “World Trade” (2005), Hanes (2001), and Borlongan (2002).

2. In terms of oil, for example, the Department of Energy Information Administra-tion released a July 2000 report that examined the long-term prospects for world petroleum supplies. The study finds that the peak in oil production could occur anywhere from 2021 to 2037 (Wood, Long, & Morehouse, 2003). The supply of clean water, another natural resource of global concern, is currently facing a “worldwide water crisis,” according to the United Nations and other international organizations; they are referring to the availability of global water resources rela-tive to growing human demand.

3. This removal of barriers leads to more flows, but also in the convergence of domestic prices to world prices.

4. To identify developing countries, we use the World Bank’s definition of low-, lower-middle-, and upper-middle-income countries. According to the World Bank, economies are divided according to 2008 gross national income per capita, calculated using the World Bank Atlas Method. The groups are $975 or less (low income), $976 to $3,855 (lower middle income), $3,856 to $11,905 (upper middle income), and $11,906 or more (high income).

5. For descriptive purposes we use flows as a proxy for openness. Although some of the increases in foreign direct investment and trade can be driven by decreasing transportation costs, there is a general consensus that countries have dramatically lowered barriers to international trade and foreign direct investment. See Jensen (2006) for a discussion of foreign direct investment policy.

6. Some argue that international migration flows have reached—and even slightly surpassed—the levels of the 19th century, though this is still a matter of some debate. See Samers (1999) and Zlotnick (1999).

7. A complete review of this literature is beyond the scope of this introduction. See Keohane and Milner (1996), Boix (1998), and Garrett (1998) for examples.

8. We refer to diminishing natural resources as (a) available in all countries (albeit to different degrees) but current demand is outpacing supply and (b) nonrenewable or extremely slow to replenish.

9. To conduct this analysis, we have made a concerted effort to include scholars who have not previously been directly engaged in the natural resource literature. We believe that this not only brings new theories and data into an exploration of the relationship between resources and governance but also facilitates linkages between scholarship on resources and politics and other areas of comparative politics and international relations.

10. In this issue, we take the position that the management and extraction of natu-ral resources will be more productive in resource-rich nations if leaders direct




resource rents toward investments and policies that help economic growth as well as toward improving the quality of life (e.g., greater democracy) for the majority of citizens.

11. Works such as Garrett (1998) argue that globalization can lead to the invest-ment in public goods, such as infrastructure. Cai and Treisman (2005) construct a formal model of political incentives to invest in public goods. Their model shows that competition for global capital can lead to an increase in infrastructure (or other “business-friendly” policies), although this result is conditional on the initial endowments of countries. In some cases, capital mobility can lead to less investment in “business-friendly” policies in poorly endowed countries.

12. Gylfason (2001) finds that natural resources lead to lower levels of investment in education, and Papyrakis and Gerlagh (2004) show that this is an important trans-mission mechanism that leads natural-resource-rich economies to have lower lev-els of economic growth. Stijns’s (2006) results point to an opposite relationship, where certain types of resources increase human capital accumulation. More generally, there is growing understanding that there are multiple responses to internationally generated resource wealth rents, just as there are different policy responses to globalization. The “varieties of capitalism” literature (see Hall & Soskice, 2001) and Garrett (1998) show that there are numerous different strate-gies to achieve economic growth, including investments in human capital.

13. As cited earlier, Dunning (2008) finds that natural resources can have complex impacts on political regimes. For broader works on the relationship between glo-balization and democracy, see Rudra (2005), Eichengreen and Leblang (2008), Li and Reuveny (2009), and Milner and Mukherjee (2009). Globalization can also have an indirect impact by raising the overall level of development. Przeworski, Alvarez, Cheibub, and Limongi (2000) argue the strong correlation between democracy and development is the result of the fact that although democracy is fragile and prone to collapse in poor countries, democratic institutions endure in wealthy countries.

14. For recent reviews on the complex relationship between institutions and resources, see Bulte, Damania, and Deacon (2005), Brunnschweiler (2008), and Alexeev and Conrade (2009).

15. For examples of the political and economic dimensions of the resource curse, see Mahdavy (1970), Auty (1994), Karl (1997), Ross (2001, 2006), Jensen and Wantchekon (2004), and Bulte et al. (2005).

16. For example, see Keohane and Milner (1996). Note that a limited number of influential works have argued that globalization has largely erased domestic poli-tics, forcing governments to adopt a common set of neoliberal economic policies. For example, see Andrews (1994), Cerny (1990), and Kurzer (1993).

17. For work on the differential effects of the resource curse, also see Karl (1997), Mehlum, Moene, and Torvik (2006), Boschini, Pettersson, and Roine (2007),




Anderson and Aslaksen (2008), Brunnschweiler (2008), and Dunning (2008). See Jones Luong and Weinthal (2010) for theory and empirical analysis on how private investment mitigates the resource curse.

18. See Alexeev and Conrad (2009) for a recent contribution on the subject.19. For example, one aspect (which Rudra does not directly explore) is the extent to

which water—like oil—can also be a major source of domestic and international conflict.

References

Acemoglu, D., & Robinson, J. A. (2000). Democratization or repression? European Economic Review, Papers and Proceedings, 44, 683-693.

Acemoglu, D., & Robinson, J. A. (2001). A theory of political transitions. American Economic Review, 91, 938-963.

Acemoglu, D., & Robinson, J. A. (2006). Economic origins of dictatorship and democracy. New York, NY: Cambridge University Press.

Alexeev, M., & Conrad, R. (2009). The elusive curse of oil. Review of Economics and Statistics, 91, 586-598.

Anderson, J. J., & Aslaksen, S. (2008). Constitutions and the resource curse. Journal of Development Economics, 87, 227-246.

Andrews, D. (1994). Capital mobility and state autonomy: Toward a structural theory of international relations. International Studies Quarterly, 38, 193-218.

Auty, R. M. (1994). Industrial policy reform in six large newly industrializing coun-tries: The resource curse. World Development, 22, 11-26.

Bearce, D. H., & Laks Hutnick, J. (2011). Toward an alternative explanation for the resource curse: Natural resources, immigration, and democratization. Compara-tive Political Studies, 44(6), 689-718.

Bijian, Z. (2005, September/October). China’s “peaceful rise” to great-power status. Foreign Affairs. Retrieved from http://www.foreignaffairs.com/articles/61015/zheng-bijian/chinas-peaceful-rise-to-great-power-status

Boix, C. (1998). Political parties, growth, and equality: Conservative and social democratic strategies in the world economy. New York, NY: Cambridge Univer-sity Press.

Borlongan, M. (2002, February 15). Pros, cons of a borderless environment. Business World. pp. 25.

Boschini, A. D., Pettersson, J., & Roine, J. (2007). Resource curse or note: A question of appropriability. Scandinavian Journal of Economics, 109, 593-617.

Brooks, S. M., & Kurtz, M. J. (2011). Conditioning the “resource curse”: Globaliza-tion, human capital, and growth in oil-rich nations. Comparative Political Studies, 44(6), 747-770.

Brunnschweiler, C. N. (2008). Cursing the blessing? Natural resource abundance, institutions, and economic growth. World Development, 36, 399-419.




Bulte, E. H., Damania, R., & Deacon, R. T. (2005). Resource intensity, institutions, and development. World Development, 33, 1029-1044.

Cai, H., & Treisman, D. (2005). Does competition for capital discipline governments? Decentralization, globalization, and public policy. American Economic Review, 95, 817-830.

Castles, S., & Miller, M. J. (2003). The age of migration: International population movements in the modern world (3rd ed.). New York, NY: Guilford.

Cerny, P. G. (1990). The changing architecture of politics. London, UK: SAGE.Davis, G. A. (1995). Learning to love the Dutch disease: Evidence from the mineral

economies. World Development, 23, 1765-1779.Dunning, T. (2005). Resource dependence, economic performance, and political sta-

bility. Journal of Conflict Resolution, 49, 451-482.Dunning, T. (2008). Crude democracy: Natural resource wealth and political

regimes. Cambridge, UK: Cambridge University Press.Eichengreen, B., & Leblang, D. (2008). Democracy and globalization. Economics

and Politics, 20, 289-334.Frieden, J. A. (1991). Invested interests: The politics of national economic policies in

a world of global finance. International Organization, 45, 425-451.Garrett, G. (1998). Partisan politics in the global economy. Cambridge, UK: Cambridge

University Press.Graham, J., Amos, B., & Plumptre, T. (2003). Principles for good governance in

the 21st century (Institute on Governance Policy Brief No. 15). Ottawa, Canada: Institute on Governance.

Grimes, P., & Kentor, J. (2003). Exporting the greenhouse: Foreign capital penetra-tion and CO2 emissions 1980-1996. Journal of World-Systems Research, 11, 261-275.

Grossman, G. M., & Helpman, E. (1990). Trade, innovation, and growth. American Economic Review, 80, 86-91.

Gylfason, T. (2001). Natural resources, education, and economic development. European Economic Review, 45, 847-859.

Hall, P., & Soskice, D. (2001). Varieties of capitalism: The institutional foundations of comparative advantage. Cambridge, UK: Cambridge University Press.

Hatton, T. J., & Williamson, J. G. (2005). A dual policy paradox: Why have trade and immigration policies always differed in labor-scare economies? (NBER Working Paper W11866). Cambridge, MA: National Bureau of Economic Research.

Hanes, A. (2001, August 2). Control could follow oil and trees south: Trade pact’s critics fear for environment. The Gazette (Montreal, Quebec).pp. A2.

International Monetary Fund. (2008). World economic outlook: Housing and busi-ness cycle. Washington, DC: Author.

Jensen, N. M. (2006). Nation-states and the multinational corporation: A political economy of foreign direct investment. Princeton, NJ: Princeton University Press.




Jensen, N. M., & Johnston, N. P. (2011). Political risk, reputation, and the resource curse. Comparative Political Studies, 44(6), 662-688.

Jensen, N. M., & Wantchekon, L. (2004). Resource wealth and political regimes in Africa. Comparative Political Studies, 37, 816-841.

Jones Luong, P., & Weinthal, E. (2010). Oil is not a curse: Ownership structure and institutions in soviet successor states. Cambridge, UK: Cambridge University Press.

Karl, T. L. (1997). The paradox of plenty: Oil booms and petro-states. Berkeley: University of California Press.

Katzenstein, P. (1976). International relations and domestic political structures: For-eign economic policies of advanced industrialized states. International Organiza-tion, 30, 1-45.

Keohane, R. O., & Milner, H. V. (Eds.). (1996). Internationalization and domestic politics. Cambridge, UK: Cambridge University Press.

Korten, D. (2001). When corporations rule the world. Bloomfield, CT: Kumarian.Kurzer, P. (1993). Business and banking: Political change and economic integration

in Western Europe. Ithaca, NY: Cornell University Press.Li, Q., & Reuveny, R. (2009). Democracy and economic openness in an intercon-

nected system: Complex transformations. Cambridge, UK: Cambridge University Press.

López, R. (2003). The policy roots of socioeconomic stagnation and environmental implosion: Latin America, 1950-2000. World Development, 31, 259-280.

Mahdavy, H. (1970). The patterns and problems of economic development in rentier states: The case of Iran. In M. A. Cook (Ed.), Studies in economic history of the Middle East (pp. 428-467). London, UK: Oxford University Press.

McMichael, A. J., Bolin, B., Costanza, R., Daily, G. C., Folke, C., Lindahl-Kiessling, K., . . . Niklasson, B. (1999). Globalization and the sustainability of human health. BioScience, 49, 205-210.

Mehlum, H., K. Moene, and R. Torvik. (2006). Institutions and the resource curse. The Economic Journal, 116 (508), 1-20.

Milner, H. V., & Mukherjee, B. (2009). Democratization and economic globalization. Annual Review of Political Science, 12, 163-181.

Morrison, K. (2009). Oil, non-tax revenue, and the redistributional foundations of regime stability. International Organization, 63, 107-138.

Morrison, K. (2011). Nontax revenue, social cleavages, and authoritarian stability in Mexico and Kenya: Internationalization, institutions, and political change revis-ited. Comparative Political Studies, 44(6), 719-746.

Najam, A., D. Rummels, and M. Halle. (2007). Environment and globalization: Five propositions. International Institute for Sustainable Development. Retrieved from http://www.iisd.org/pdf/2007/trade_environment_globalization.pdf




Ndulu, B. J., O’Connell, S. A., Bates, R. H., Collier, P., & Soludo, C. C. (Eds.). (2007). The political economy of economic growth in Africa, 1960-2000. Cambridge, UK: Cambridge University Press.

Papyrakis, E., & Gerlagh, R. (2004). The resource curse hypothesis and its transmis-sion mechanism. Journal of Comparative Economics, 32, 181-193.

Pope, C. (1997, November 22). Beware globalization that leaves the people behind. International Herald Tribune. Retrieved from http://www.highbeam.com/doc/1P1-22710937.html

Prebisch, R. (1950). The economic development of Latin America and its principal problems. New York, NY: United Nations.

Przeworski, A., Alvarez, M. E., Cheibub, J. A., & Limongi, F. (2000). Democracy and development: Political institutions and well-being in the world, 1950-1990. New York, NY: Cambridge University Press.

Robinson, J., R.Torvik, and T. Verdier. (2006). Political foundations of the resource curse. Journal of Development Economics, 79 (2), 447-468.

Rodrik, D. (1999). Trading in illusions. Foreign Policy, 123, 54-62.Romer, P. (1986). Increasing returns and long-run growth. Journal of Political Econ-

omy, 94, 1002-1037.Ross, M. (2001). Does oil hinder democracy? World Politics, 53, 325-361.Ross, M. (2006). A closer look at oil, diamonds, and civil war. Annual Review of

Political Science, 9, 265-300.Rudra, N. (2005). Globalization and the strengthening of democracy in the develop-

ing world. American Journal of Political Science, 49, 704-730.Rudra, N. (2008). Globalization and the race to the bottom in developing countries:

Who really gets hurt? Cambridge, UK: Cambridge University Press.Rudra, N. (2011). Openness and the politics of potable water. Comparative Political

Studies, 44(6), 771-803.Sachs, J. D., & Warner, A. (1995). Natural resource abundance and economic growth.

NBER Working Paper Series, 5398, 1-47.Samers, M. (1999). “Globalization,” the geopolitical economy of migration and the

“spatial vent.” Review of International Political Economy, 6, 166-199.Schrecker, T. (1997). Surviving globalism: The social and environmental challenges.

London, UK: Macmillan.Stijns, J. (2006). Natural resource abundance and human capital accumulation. World

Development, 34, 1060-1083.Stolper, W. F., & Samuelson, P. A. (1941). Protection and real wages. Review of

Economic Studies, 9, 58-73.Sriprayoonskul, S. (2000, August 4). Trade deals threaten natural resources. The Nation

(Thailand). Retrieved from http://www.highbeam.com/doc/1P1-45888519.html




Wibbels, E., & Goldberg, E. (2010). Natural resources, trade and development: The quest for mechanisms. Unpublished manuscript.

Wood, J. H., Long, G. R., & Morehouse, D. F. (2003, April). World conventional oil supply expected to peak in 21st century. Offshore. Retrieved from http://www.offshore-mag.com/index/article-display/173967/articles/offshore/volume-63/issue-4/technology/world-conventional-oil-supply-expected-to-peak-in-21st- century.html.

World trade talks threaten livelihoods, but fisheries may escape the net. (2005, Decem-ber 13). Africa News. Retrieved from http://allafrica.com/stories/200512130323.html

Zacher, M. (Ed.). (1993). The international political economy of natural resources. Brookfield, VT: Edward Elgar.

Zammit, A. (2003). Development at risk: Rethinking UN–business partnerships. Geneva, Switzerland: United Nations Research Institute for Social Development.

Zlotnick, H. (1999). Trends of international migration since 1965: What existing data reveal. International Migration, 37, 21-61.

Bios

Nita Rudra is an associate professor of international affairs at the University of Pittsburgh. Her research interests include the impact of globalization on social wel-fare expenditures in developing countries, the political foundations of different welfare regimes, and the causes and effects of democracy in developing nations. Her most recent works appear in the Journal of Politics, American Journal of Political Science, Studies in Comparative International Development, Comparative Political Studies, International Organization, and International Studies Quarterly. She pub-lished Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt? She recently completed a one-year fellowship awarded by the Council on Foreign Relations at the Social Development Department of the World Bank.

Nathan M. Jensen is an associate professor in the Department of Political Science at Washington University in St. Louis, fellow at the Center for Political Economy, and director for the Program on Multinational Enterprises and the Global Economy at the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University. His research includes Nation-States and the Multinational Corporation, and his peer-reviewed articles include publications in the American Journal of Politi-cal Science, Journal of Politics, International Organization, Comparative Political Studies, Journal of Conflict Resolution, Journal of Law and Economics, Review of International Organizations, and International Interactions.



globalization and the politics of natural resources

Documents