The Wenar Proposal vs. Realpolitik

Reading Leif Wenar’s excellent and impassioned article, I am reminded, yet again, of how critical it is for policy makers to come to grips with the thorny question of the “resource curse” — both in Africa and elsewhere. In the time I spent in 2005 and 2006 researching and reporting my book on the African oil boom, I was repeatedly struck by just how unfair it seemed for tyrants such as Obiang to keep adding to their private jet fleets while their people were dying of easily preventable diseases. I came into this story from the perspective of a journalist, rather than a policy expert, concerned with sharing an important story with the world rather than tackling the difficult business of actually coming up with solutions. That is why I will always have huge respect for people who come up with innovative proposals, such as the one we have before us today. Leif Wenar’s contribution is certainly one of the freshest and most original I have read in the past several years. The resource curse riddle, I am convinced, has both structural and behavioral components to it, and any meaningful solution will have to address both facets. Dr. Wenar’s certainly does that.

I must confess that I am a little troubled, at the outset, by some of the more philosophical questions of sovereignty and representative government that such a fundamental rethink of property rights throws up. Even if we accept the idea of property rights as a universal value (an admirable position, to be sure), it seems to me that there is a dangerous precedent to be set if we invest it with a quality of extraterritoriality that risks turning every country’s citizens into hapless victims of their own government’s “theft.” It is not hard to imagine the kinds of cases that would be brought against the United States, for example.

But I am certainly prepared to set aside such global moral quandaries for the time being. What I am more concerned with at the moment are some of the practicalities of how such a system would work. To this end, I wonder if I could just raise a few points for clarification.

My first question is this: Who determines when the government of Sudan, say, has reached the standard of a “minimally decent, unified government”? Will this be a congressional committee of some sort? Desk officers at the State Department? Or some independent board that has yet to be set up? How will we protect against the influence of lobbyists? Given the manifest financial windfall that goes along with being removed from the doghouse, isn’t there a risk that this process will become deeply politicized? Or simply reduced to who has the best PR apparatus?

Next there is the question of what happens once this benchmark has actually been met. The words “minimally decent” suggest that the bar is being set fairly low. This is a reasonable and eminently defensible position, to be sure. After all, no one would suggest that Sudan must be turned into some sort of Sahelian version of Norway before it can get its Clean Hands Trust funds released. So what counts as “minimally decent and unified” in this context? We can probably all agree that Equatorial Guinea does not make the cut as things stand. But would we apply the term to, say, Gabon? Is it all Obiang has to do to get his hands back on the oil money just to act a bit more like Omar Bongo? That wouldn’t be hard, really. Set up a couple of weak opposition parties, tell your goons not to get quite so carried away in the prisons, and you can keep all your mansions and your private jets. Isn’t there a risk here that we’re offering the carrot of (what amounts to) a 100% bonus royalty payment, financed by American consumers, to governments that may actually be rather corrupt?

But there is something more worrying in this benchmark, and it is to do with the word “unified.” Certainly, we all want strong, unified states in Africa where people aren’t butchering one another over access to resource wealth. Unfortunately, though, setting this as (in effect) a criterion for funding would only have the opposite effect.

Let us not forget how the rebellion in Darfur actually began. In 2003, sensing that for their decades of warfare the Sudan People’s Liberation Army in the south of Sudan were about to be rewarded with a massive, internationally brokered power-sharing arrangement, certain groups in Darfur began attacking government installations, hoping to achieve a similar settlement. Setting up a process in which governments cannot access “their” money until they have unified their countries, it seems to me, gives any aggrieved minority the power of an instant veto-risking destabilization in what are often already unstable countries. It strikes me that African governments already have enough built-in incentives to promote unity and stability within their own borders and that punitive measures only serve to ratchet up the stakes (in a way that is ironically similar to the effect that resource windfalls have on these countries in the first place). It strikes me that the Sudanese people do not need “an extra incentive to unite in installing a government that is in some way responsive to the people’s wishes.” What they need are peacekeepers.

My main concern with this proposal, though, has to do with the effect it might have on the international trade environment. This is probably not the place to debate free trade (and certainly, I claim no expertise to do so). But it seems a given that (to take the example at hand) China would instantaneously retaliate by imposing tariffs of its own against American products, and could easily justify them by claiming that the United States has bought “stolen goods” from the people of Iraq, or Taiwan, or even Equatorial Guinea (where the biggest business partner remains the United States, not China).

At its heart, this proposal is based on an assumption that lawmakers will embrace a mechanism that uses tariffs to achieve political ends, and that they will be happy to put noble ideas ahead of the free-trade agenda. As such, it seems unlikely to pass. Dr. Wenar makes the case that these are “anti-theft tariffs” and therefore “different from other tariffs,” but this seems a point likely to be lost (or at least dismissed as semantic) in the realpolitik of policymaking.

He is right that American manufacturers would be tripping over themselves to support such an initiative, but herein lies the rub. Lobbyists for American industries already have huge influence over Congress, and yet have not been able to revoke China’s Most Favored Nation status. It seems unlikely that some three-steps-removed idea of property rights accruing to the Sudanese people is going to tip the balance.

These tariffs may have noble intentions, but the stark reality at the end of the day is that they are just like any other tariff, and will be treated as such by the Chinese and others. There is very little to prevent any country in the world from claiming that the oil the United States buys from the Niger Delta, or from Cabinda Gulf Oil Company, to take two examples, is “stolen” (and a very good case could be made in both instances), and thus slapping a tariff on U.S. goods. The idea that the World Trade Organization would not be sympathetic to Chinese protests, or that it would find these tariffs “as acceptable as the 1990 sanctions that kept Iraq from selling stolen oil from Kuwait,” seems wishful thinking. What this analogy fails to take into account is a lingering international post-Westphalian consensus about sovereignty and territorial integrity that sees invasions and occupations as dangerous acts of aggression, and therefore far more objectionable than business arrangements with controversial regimes. The fact is that buying Sudanese oil is simply not the same as invading Sudan and stealing its oil. And no one at the WTO is likely to see it that way.

Let me just reiterate in closing that these are questions and queries, rather than a wholesale rejection of the proposal put forth. Dr. Wenar has given us an intriguing and exciting idea to consider, one which, with a little clarification and refinement, could make a great starting point. I look forward to the discussion!

Also from This Issue

Lead Essay

  • We All Own Stolen Goods — and How Defending Property Rights Can Help the World’s Most Oppressed People by Leif Wenar

    Developing countries with massive oil or mineral reserves are often wracked by corruption and strife as their would-be rulers jockey for control of the resources that can make them immensely wealthy. But these resources, argues political philosopher Leif Wenar in this month’s provocative lead essay, belong to the people of these countries – some of the poorest people in the world – not their rulers. So trade in these resources amounts to trade in stolen goods. Wenar argues that we must “enforce property rights directly” by taking “legal action in U.S. jurisdictions against the middlemen who trade Americans’ dollars to the worst regimes in exchange for stolen resources.” Because this cannot stop “resource cursed” countries from trading with less enlightened countries, such as China, Wenar additionally proposes a tariff on imports from China (or from whatever country is receiving “stolen” resources), the proceeds of which are to be held in trust for the rightful owners of the resources, and disbursed to those people in the event of their government’s reform. “The priority in reforming global trade,” Wenar argues, “must be to lock in the rights that define the market order. The first step in improving the prospects of poor people is to enforce the rights they already have.”

Response Essays

  • The Resource Curse and Leif Wenar’s “Clean Hands Trust” by Christopher Wellman

    Washington University political philosopher Christopher Wellman praises Wenar’s proposal for fighting the resource curse, but he criticizes the idea of a “Clean Hands Trust” on the ground that it “requires too LITTLE, not too much” of those of us involved in the market for natural resources “stolen” from their rightful owners. Wellman argues that the “Clean Hands Trust” is analogous to a slave-owner attempting to rectify his wrongdoing by offering the slave a large sum in compensation. “If the slave owner cannot clean her hands by paying the slave after the fact,” Wellman asks, “then why should we presume that the person who buys slave-produced cotton from a slave owner can clean her hands by paying the slave after the fact? And if the person who buys morally tainted cotton cannot clean her hands in this way, why think that those who buy inexpensive shirts constructed from slave-produced cotton can clean their hands by subsequently reimbursing the slaves?” Similarly, he argues a Clean Hands Trust would fail really to clean our hands.

  • To Punish the Guilty by Andrei Illarionov

    Cato senior fellow Andrei Illarionov, a former chief economic advisor to then-Russian President Vladimir Putin, argues that there is nothing special about the “resource curse,” which represents just one among many kinds of theft by corrupt political elites. According to Illarionov, Wenar fails to make a principled distinction between the actions of the political leaders of Equatorial Guinea and those of Russia that would motivate restricting trade in goods from the former but not the latter. Illarionov argues that the precedent of treating a country’s natural resources as belonging to its people is the problem, not the beginning of a solution. In practical political reality, the idea of collective national ownership of resources often translates directly into nationalization and control by political elites. Additionally, Illarionov argues that the trade sanctions Wenar proposes would punish innocent citizens who already suffer under corrupt rulers. The issue, he argues, is not a matter of what is stolen, but how we will treat those responsible for theft.

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