Book Review: How the West supports corrupt dictators |

by Sasha Alyson

Blood Oil: Tyrants, Violence, and the Rules That Run the World, by Leif Wenar, Oxford University Press, 2016.

Suppose I steal your watch and sell it to Tom, who knows it was stolen but wants a cheap watch. It does not legally belong to Tom. If the law catches up, Tom has to return it to the rightful owner. And if somebody with a badge comes knocking on the door, I plan to hide under the bed. Possession is not the same as ownership. Might does not make right.

Except….

If I lead a military coup and capture control of an entire country, the very next morning I can sell its oil, cobalt, and forests and the money is mine. I’ll probably stash some off-shore, build myself a big palace, give some to cronies, and use the balance to pay a big police force. The rest of the population doesn’t get a cent although it was their oil, cobalt, and forests too, and nobody with a badge is going to knock on my door. The police work for me, remember? Whoever bought these resources from me, even knowing the circumstances, is now the rightful owner. In this case, international law says that might makes right.(1)

Why? Because it’s convenient for the wealthy countries that make the rules, and want cheap resources. It doesn’t work for the citizens of the country being looted. Quite the opposite: The money feeds brutal and corrupt dictatorships.

This dynamic, part of what’s known as the resource curse, underlies much of the world’s poverty. Every government in the world must get money from somewhere. Mostly it comes from some combination of three sources:(2)

Foreign aid
Sale of resources
Taxes

Let’s look at each of these.

Foreign aid is usually given for the benefit of the donor; other stories on this site show how it actually undermines the societies it claims to help. Furthermore, it’s unreliable unless you’re willing to be the donor’s puppet. Countries cannot truly develop under the yoke of foreign aid.

Resource sale – for countries that have natural resources – is more appealing, but it too has pitfalls. First, the resources will run out one day. Good leaders prepare for that; most just figure it will be somebody else’s problem. Second, the common model is for developing countries to let foreign corporations extract their resources, in return for a modest royalty, and ship them abroad for processing, which is where real value is actually added. These royalties always benefit those in power, but not so often the country as a whole. The nation’s bank account – oil or minerals in the ground, for example — is being drained, and unless the money is invested in long-term development, this will hurt its long-term prospects. But today’s dictators aren’t thinking about your grandchildren.

Taxes provide significant income only if people are engaged in activities which earn money. That requires that the government help – or at least, not get in the way – as they develop their capabilities, create and run businesses, create infrastructures, and so on.

This list explains the resource curse. Taxes paid by a better-educated, productive population are the best way to fuel long-term development. But that approach carries a risk. Leif Wenar writes: “Instead of going through the difficulty and danger of making the people productive and then taxing them, the authoritarian simply signs a contract with a foreign firm and sends soldiers to protect the extractive site. The foreigners take the resources; the regime receives payments of an undisclosed sum.”

Aid offers a second source of easier income; autocrats often use both sources. Why, then, is this called the “resource curse” rather than the “resource-and-aid curse”? Resource sales bring in more money. Further, I’d guess that the term was coined by Western academics who were more comfortable focusing on other countries’ misuse of their resources, rather than the way their own countries contributed to the problem.

This is the dilemma that Leif Wenar (pronounced lafe way-nar) examines in his book Blood Oil: Tyrants, Violence, and the Rules That Run the World. Even if we agree that international law is wrong in this case, what can we do? Ask dictators to be nice? Invade and replace them?

Wenar and his colleagues have developed another solution, which doesn’t require tanks and soldiers: A “Clean Trade” policy. Countries that choose not to contribute to bad governance and corruption would refuse to buy what are effectively stolen goods. If enough countries did so, corrupt rulers would lose most of their support.

Clean Trade does not challenge the ruling regime of any country; it merely says, “We’ll respect your sovereignty. We, in turn, will exercise our right not to do business with you.” The policy would apply to any country judged “Not Free.” (Obvious questions arise here; we’ll get to them soon.) A country that enacted a Clean Trade policy would not issue visas to officials of the disqualified country, nor could they use its banks and other financial services. No one in the “Clean Trade” country could purchase its exports.

It needn’t be enacted all at once. The first step might be to cut off only the most egregious, unaccountable dictatorships. Where trade volumes are large, Wenar suggests a tapering off period, up to five years, during which the permitted import levels would steadily drop. For countries judged “Partly Free,” a reduced level of imports might be allowed. No one expects a Clean Trade policy to quickly end corruption, but it could provide strong, steady pressure toward that goal.

The Clean Hands Trust

A few countries might adopt Clean Trade policies, but the whole world isn’t likely to do so soon. If China continues to buy oil from Equatorial Guinea, for example, Equatorial Guinea won’t care if Belgium refuses to buy. And then, when Belgium imports Chinese goods that were made with that oil, Belgian money will continue, albeit indirectly, to subsidize the government of Equatorial Guinea and its President, Teodoro Obiang. (Obiang has officially been president, and effectively dictator, since he seized power in a 1979 military coup.)

The solution, proposed by Wenar and his colleagues, is a Clean Hands Trust. With this, he writes:

“[T]he US government can treat Obiang’s shipments of oil to China as what they are: the passing of stolen goods. Say, for example, that China buys $3 billion worth of oil from Obiang. The US government’s response will be to establish a Clean Hands Trust for Equatorial Guinea. This trust is a bank account that the US government will fill until it contains $3 billion. The money to fill the trust will come from duties on Chinese imports as they enter the United States. The $3 billion in this trust will then be held for the citizens of Equatorial Guinea, the owners of the stolen assets, until a minimally accountable government is in place there.”

Which countries are judged “not free”?

Who decides which countries are “free,” “partly free,”and “not free”? Most countries fall somewhere on a continuum. But foreign policy usually involves blurry boundaries, and there are imperfect but workable ways to address this one. Wenar suggests four criteria for deciding whether the citizens of a country – the rightful owners of its resources – consent to their government’s management of those resources.(3) Ratings from several independent organizations could be combined to form a consensus opinion. In practice, the details will be decided by the countries that adopt Clean Trade policies.

Cash transfers

Wenar proposes that the Clean Hands Trust would hold funds “until a minimally accountable government is in place” in the country. Another approach is possible. These funds could be given directly to the citizens of the country, as cash transfers to families and individuals, as soon as that was possible.(4)

How will it happen?

“I don’t want to support corrupt dictators who are looting their countries.” Most people would agree with that statement. Yet many – perhaps most – of us have supported those dictators the last time we filled our fuel tank. Few of us know where our purchase price ultimately goes, nor do we spend much time thinking about it.

But once the idea is out there – we shouldn’t prop up dictators by purchasing stolen resources – it’s hard to refute it. Those in the North, where Clean Trade acts could have the greatest influence, can use this argument when writing to our legislators. Elsewhere, this offers a hard-to-answer question to pose to the North: Why are you propping up dictators by purchasing stolen resources? It won’t bring immediate results, but no perfect solution is presenting itself to us. Asking this question, often, and discussing Clean Trade as an answer, moves us in the right direction.

Notes and Sources

Before writing Blood Oil, Leif Wenar published a 13-page article about “Clean Trade in Natural Resources” which offers a brief introduction to this idea. It’s available at Clean Trade. (Clicking this link will cause the PDF to download immediately.)

1. Wenar offers this real-life example: “For decades, the French national oil company Elf was at the center of a massive nexus of corrupt dealings in several African states. French officials secretly siphoned hundreds of millions of euros of Elf’s oil money, and used some of the money to prop up authoritarian African leaders in the French sphere of influence, while French soldiers also provided these leaders military support. This dark system thwarted development where Elf was operating. For instance, an Elf representative later testified that the company was giving the head of the African country at the center of l’affaire Elf, Omar Bongo of Gabon, 50 million euros per year. And to take a suggestive comparison, life expectancy in Gabon today is 12 years less than in the nearby non-oil state of Togo—even though Gabon’s average income is 18 times greater.”

2. Wenar mentions a fourth source of income: Loans. But loans are income only in a very short-term sense. Ultimately, they are debts. Unless they are invested well – and that seems to be the exception when autocrats are in power – then loans become a drag on the country.

3. Wenar’s criteria for deciding whether citizens of a country have freely given their consent for management of their resources are as follows:
Information: Citizens cannot approve the management of their resources unless they have details of that management.
Independence: Consent must not be forced, nor the result of “extraordinary psychological manipulation” by the government.
Deliberation: Citizens must be able to discuss that management with one other.
Dissent: Deliberation is meaningless, unless citizens are able to dissent without risking severe costs.

4. Oil to Cash: Fighting the Resource Curse through Cash Transfers, by Todd Moss, Caroline Lambert and Stephanie Majerowicz, explores a related approach, in which the country selling resources would use a portion of that income for cash transfers. Corrupt-to-the-core regimes won’t do this; but where the leadership is open to reforms (perhaps soon after coming to power), this may be feasible. The book is published by the Center for Global Development; a free PDF summary is at: Oil to Cash.

Comments from Twitter

We announced this story on Twitter, where readers made these comments.

Pedro Zaraza 7.5K, @PedroZarazaVe: Western support or Western pillage?
US has more 800 military bases around the world… Not including NATO… Big support!!

Egbe, @Egbe86211979: The current elite class was established by the West to perpetuate it’s interests & this has continued to undermine African development. The imbalance international trade policies between the core $ the periphery, continues to foster poverty in developing states. A sad reality!

Lady Linda Greene, @Qw5R2Hku7hdx7X0: Some innovative thinking in this essay. It’s a complicated issue if you ignore the source of the problem.There are anti corruption laws on Western countries books & they are enforced to some extent. But if the buying country goes to buy at the cheapest rates; that’s the problem.

Harrison Mensah Adiko, @mensah_adiko: It is laudable and very refreshing seeing people from other races having genuine interest and indeed act to eradicate dictatorships from the vulnerably poor nations of the world, many of which are located in Black Africa.