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Lecture 8

Lecture 8: The Democratic Republic of Congo

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University of Toronto Scarborough
Political Science
Paul Kingston

POLA90 – Lecture 8 (March 6) Democratic Republic of Congo Why the DRC?  Large…(as large as Western Europe or the USA east of the Mississippi and the 3 rdlargest state in Africa)! th  4 largest population in Africa at 67 million – but low population densities!  Well endowed…(coltan, cobalt, copper, timber, gold, diamonds, uranium, etc)!  A country with a very recent violent past, beginning with a (i) struggle against Mobutu‟s dictatorship, (ii) moving towards a protracted internal civil war - especially in the resource-rich Eastern provinces - exacerbated by state collapse, and (iii) descending into a regionalized pillage-oriented conflict – sometimes called Africa‟s World War… Debating the Causal Validity of the Resource Curse:  Resource curse: when having resources is worse for the country than not having them. o Similar to Collier‟s resource trap.  Three Basic Questions to ask: o Is an abundance of natural resources bad for growth and development? o If so, what causes this “resource curse”? o How can the “resource curse” be overcome? Early Development Thinking  Initially, natural resources thought to be an unmitigated asset for development…  Key challenge of many post-colonial states was to accumulate enough investment capital to not only promote economic growth but also to promote economic independence from the colonial powers… o Capital and resources were seen as good in theory and in practice.  Modernization theorists (W.W.Rostow) also argued that natural resources were essential in providing the capital to promote the transformation from „underdevelopment‟ to „industrial takeoff‟… o Import Substitution Industrialization Present Development Thinking  An abundance of natural resources can have a negative effect on economic growth and development  An abundance of natural resources can have a negative effect on political development – hurting processes of democratic transition and consolidation o Its not the resources themselves that are the problem, but the link between resources and wealth with politics and power could be the problem.  An abundance of natural resources can contribute to the breakdown of states and the onset of civil wars o Correlation between natural resources and poor political processes.  Yet….what are the causal mechanisms linking these things? Are they clear???? The Resource Curse and Economic Development  Lots of statistical proof that shows a strong correlation between an abundance of natural resources and slower rates of economic development o Examples:  Comparisons of growth rates across Africa between resource rich and resource poor countries.  Comparisons of per capita income levels across the globe of resource-rich and resource-poor countries  Resource-rich countries had poorer economic performances in agricultural and manufacturing growth  Dutch Disease: an economic problem Holland had.  Large amounts of oil and mineral wealth were often associated with higher levels of poverty and human development.  Why? o Declining terms of trade hypothesis  Often linked to the dependency school of thought  Refers to the way in which global trade markets affect relative prices.  A problem for countries that specialize in exporting raw materials, but don‟t do manufacturing.  Selling something to someone, and the money that they make is based on how much they later have to buy these materials back from other countries. o Volatility of global commodity markets  Characterized sometimes by booms (oil) but more often by busts.  Steady declines in global commodity prices since the 1980s  Makes it hard for countries to budget and have stability o Natural resource sectors are often “enclave sectors” with poor linkages to the rest of the economy  Happens in Canada with the Oil Sands of Alberta  Makes it possible to have lots of resources and extreme poverty  The money made from resources is spent outside of the country, so the wealth doesn‟t really benefit the country. o Dutch Disease hypothesis  Resource booms “crowd out” investment flows into more productive sectors of the economy  Example: All foreign investment money being directed at ONLY the Oil Sands, so then the rest of the economy is ignored. Resource Curse and Political Development  Resources are often associated with the reinforcement of authoritarian regimes and states. o One scholar calculated that a 1% increase in a state‟s dependence on natural resource resulted in an 8% increase in the probability of authoritarian rule  Showing a general trend.  Might not be correct  Resources are also associated with the weak performance of new democracies – countries with abundant natural resources often having weak transitions to democracy if not democratic breakdown.  Why? o Induces laziness  Easier to establish an authoritarian rule than to include citizens in democratic processes. o If natural resources are controlled by private economic elites, their abundance can promote “rent-seeking” behaviour  “Rent-Seeking” o Abundant natural resource endowments can lead to the emergence of “rentier states” What is “rent-seeking behaviour”?  Rent: o Collier – “rent” is the excess of revenues over all costs including normal profits.  Profits WAY in excess  Easy money. o Examples:  Monopoly profits from extractive industries connected with natural resources  Strategic aid payments  Cold War, War on Terror, etc.  Money from Western countries  Remittances  Sending money back to one‟s family “back home”  Money not generated within the borders. How is “rent” used?  Distributed as a mechanism for maintaining influence and power o Can be distributed by political elites, or even business elites.  Can include a wide array of things from the: o politically-motivated subsidies and transfers often linked to networks of political patronage and patron- clientelism, o Bureaucratic corruption (the allocation of public money for private gain)  Deciding that he wants to make some extra money. o Other illegal transfers  In essence, „rent-seeking‟ behavior represents the salience of informal political processes that can serve to undermine the formal and institutionalized rules of the game  Example: IN DRC, one scholar often argued that “the process of informalization and de-institutionalization…has now become generalized”  Rent-seeking as a partial explanation for why Latin America stuck with import-substitution industrialization (ISI) while East Asia adopted export-oriented industrialization (EOI) o ISI: promote self-reliance. o Rent seeking behavior can complicate policy making process and make it more difficult for countries to switch strategies. What is the “rentier state” ?  Large amounts of revenue accrue directly to the state o Disproportionately large amount of money going to the government.  Mitigates need to raise large amounts of money through taxation  Absence of significant taxation weakens rights of citizens to demand accountability from rulers – “no representation without taxation”!!! o The more viable the system of taxation, the more viable is the relationship between the state and it‟s society. o Many countries in the developing world have this problem o They avoid the citizen‟s hate for taxes, and try to generate money elsewhere. o Example: American Revolution. The Americans didn‟t want the British to tax them unless they let them represent their own interests, and actually give them space to grow in ways that they see fit. o No representation without taxation: a recipe for authoritarianism. o Gets citizens to comply because they get money instead of an opinion. Strengthens the ability for the state to say “shut up” to the citizens.  Further financially empowers „rentier states‟ to coopt populations through the distribution of rents  In turn, encourages „rent-seeking‟ dependency-creating behavior on the part of socio-economic and political elites… The Resource Curse, State-Breakdown, and the Emergence of Civil Wars  There is a strong statistical correlation between dependence on natural resource exports and civil war  Particularly strong with respect to secessionist civil war o Secession: when a group wants to separate from the country  Example: Quebec and Canada  Some evidence suggests that there is a strong correlation between natural resource endowments and the length and intensity and territorial spread of civil wars o Similar to war economies o Might not cause the problem, but they can help continue it.  Natural resource endowments also seem to correlate negatively with successful peace-building initiatives  Why? o Natural resource endowments can exacerbate grievances associated with the outbreak of civil wars  Examples:  Uneven ethnic/regional distribution of revenues  Environmental degradation  Employment creation  This in turn can provide motivation for emerging rebel groups to capture them  Example: Algeria. o Natural resource endowments can also give rise to explanations about the causes of civil wars associated greed  Examples:  Providing incentives for fighting  For prolonging civil wars  For NOT pursuing peace Moving from “Correlations” to “Causes” – Why is This so Difficult?  How to measure resource abundance…? o Ration of revenue from natural resource endowments to GDP? o Ratio of natural resource endowments to overall exports? o Revenue from natural resource endowments as a percentage of government revenue? o What data sets does one use? How does one know they‟re accurate?  Is the problem natural resource endowment in general, or is it with particular types of natural resources? o Some commodities have a positive trend with respect to the terms of trade  Sometimes the prices of commodity get better. o What difference does it make if resources are extracted in one place versus resources whose extraction processes are diffused throughout the country (oil versus coffee)? o In the context of civil wars, some scholars argue that the real problem is the existence of „lootable‟ resources  Resources that are easy to extract, vs. resources that require complex and complicate practices.  Example: Diamonds o In other words, the answers to these questions remain unresolved….  It is also self-evident that natural resource endowments do not always have negative outcomes…. o Not incompatible with improved outcomes with respect to human development o Example: recent UNDP Human Development Report findings with respect to Oman and Saudi Arabia. They are resource-rich AND have a high per-capita income. o Larger literature on „rent-seeking‟ behavior reveals that it is not necessarily associated with underdevelopment and slow growth. Rent-seeking behavior can have different effects in different political contexts.  Many s
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