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Property Rights and the Resource Curse (SERIES)

A series of articles derived from Dr. Leif Wenar's working paper "Property Rights and the Resource Curse."

By Leif Wenar | Spring 2007

PART 1: Property Rights and the Resource Curse

PART 2: Might Makes the Right to Sell?

PART 3: Stopping the Flow of Stolen Resources

PART 4: A Clean Hands Trust for the People of Sudan

ABSTRACT

The resource curse afflicts poor countries with valuable resources like oil and diamonds. Such countries are prone to repressive governments, civil wars, and slower growth. The article argues that the resource curse often results from a failure to enforce property rights: the property rights of each country's people in that country's natural resources. This right is widely affirmed in international law, but violated when dictators and civil warriors sell off a territory's resources in circumstances where the people could not possibly authorize those sales. Firms that buy resources from repressive regimes are therefore receiving stolen goods, and passing these stolen goods on to consumers. Using a widely accepted metric, the article shows that at least one in every eight barrels of oil currently entering the United States has been stolen from its country of origin.

Previous proposals to address the resource curse have focused on trying to convince kleptocratic regimes to behave better, or on creating novel international institutions. This article describes two property rights enforcement mechanisms that use existing national institutions to sanction those who buy resources from the worst regimes. The first mechanism is litigation in rich-country courts against the international corporations that receive stolen resources. The second mechanism is an "anti-theft" trade policy that enables rich countries to penalize states that buy resources from disqualified regimes.

The article shows that authoritarianism, civil conflict, and slow growth in less developed countries can result from a failure to enforce the property rights of the poor. This flaw in global commerce can be corrected by ensuring that all international resource sales respect the rules of legitimate trade.

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Read More: Business, Development, Ethics, Governance, Security, Trade, Angola, Equatorial Guinea, Nigeria, Sierra Leone, Global

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