Aid, Oil and a Question of Magnitudes

As Blattman likes to say, our views are inevitably influenced more than we’d like to admit by the one or two countries we know most. In my case that’s Venezuela, which is where I’m from, and a country I’ve long blogged about. The growing protests there this month have seen me return to that beat, temporarily.

Needless to say, you don’t write about a place for 12 years without it powerfully affecting your understanding of development.

A smallish (30 million people) middle income country sitting on top of an ocean of oil, Venezuela’s experience neatly puts international aid flows in perspective.

On average, over the last 10 years, Venezuela has taken in roughly $100 billion in oil revenues each year. A trillion dollars total, give or take. That’s within spitting distance the total overseas development aid from all OECD countries to all middle-income and poor countriesAll of it going to a single, not-especially-poor, not-especially-large country run by a government whose entire basis of legitimacy is its militant determination to make people’s lives better.

If there was some simple mechanism whereby throwing money at a government deeply concerned with poverty would make it go away, surely Venezuela would have eradicated poverty a long, long time ago. And yet our social performance over the last 15 years has been middling, at best. Sure, poverty fell, as did infant mortality and illiteracy, but none of this happened markedly faster in Venezuela than in other countries in the region that didn’t get a massive oil bonanza.

After a decade-long petroboom, Caracas – my hometown – is still ringed by some of the most violent slums anywhere in Latin America. Hunger is still a problem in rural communities. One squandered trillion dollar oil-boom later, a government of undoubted political commitment to the poor has demonstrated just to what extent good intentions are not enough.

Recent trends are threatening even the advances that were made at the height of the oil boom. A disastrous anti-business policy stance, alongside some truly reckless fiscal policies have left the country facing very high inflation and mounting shortages. Here, to give you a sense, is what you have to go through to make a cake in Caracas these days. As mass demonstration rock the country, the oil bonanza of the last 15 years seems increasingly distant.

It takes seeing the Venezuelan case up-close-and-personal to realize the basic good sense of Angus Deaton’s critique: there is no amount of money and no volume of good intentions that can make up for the impact of a bad policy regime.  A sharp look at Venezuela, Nigeria, Indonesia and the other developing petrostates should make this obvious.

Somehow, it doesn’t.

One thought on “Aid, Oil and a Question of Magnitudes”

  1. What is wrong with development is insufficient anthropology. Factor this into development as the major parameter impacting on project success then you can calculate whether you will have success in the project. It may even discourage the commencement of the project.

    e.g. Proposed Project X. Anthropological factors required for 50 percent success are 1,2,3 etc. Anthropological analysis of donor and receiving partners suggests factors not sufficiently available therefore only 30 percent success can be achieved. Don’t do until anthropological factors improve to required levels. Or if a positive analysis then proceed with project.

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