Impact of Resources on Corruption

The US is unusual in granting ownership of subsurface minerals to private property owners.  In most countries, oil, gas, coal, ore, and other subsurface minerals belong to the state.  This means that in most countries private companies must make deals with government officials, often for many billions of dollars, so the temptation to demand and pay bribes is enormous.  The degree of corruption this creates turns many resource rich countries into virtual kleptocracies that do so much damage to governance and social capital that most of these countries end up actually worse off than neighbors without comparable resources (the so-called “resource curse).

Even in the US, political provisions usually must be made before resources can be extracted.  The result is lavish political spending by resource companies and industry groups and widespread political corruption.  It has become accepted that many politicians owe their seats and their votes to special interest groups, but perhaps nowhere is that more true than in coal and oil states.  Senators like John Barrasso (Republican from Wyoming) and Joe Manchin (Democrat from West Virginia) are openly known as “the senators from Big Coal,” and can be counted on to vote exactly the way the coal companies want them to.  My own home state of Texas has elected more than its share of politicians who check their consciences at the door when it comes to a vote for giving Big Oil yet another big tax break.

If it were just a matter of votes, this kind of “bought and pad for” politician would be something we could live with.  But, increasingly, the harm that politicians do on behalf of their financial masters is done in secret, by using influence to change a phrase here or insert a sentence somewhere else in key bills, creating tax loopholes and regulatory exemptions on behalf of the industries that fund their campaigns.  The net effect is to allow wealthy resource companies to operate very largely at public expense and without adequate regulation until a disaster on the scale of the BP Deepwater Horizon blowout finally attracts public attention.  (When the latter happened, an investigation of the government agency responsible for drilling safety revealed that over the years it had effectively lost its authority over the corporations it oversaw, and had come to be managed almost entirely by industry representatives nominated by – you guessed it – politicians who had received massive donations from the industries they were supposed to be overseeing.)

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