Saturday, March 6, 2010

What’s more important for a nation, good citizens or good governments?


March 3 and 4, 2010, I participated in a very interesting conference titled “Oil and Gas in Federal Systems” held at the World Bank in Washington D.C. organized by the World Bank and the Forum of Federations, with sponsorship from NORAD.

I believe all participants learned a lot about issues and facts related to how oil and gas revenues are and should be distributed to central governments, states and municipalities. I know I certainly did. Thank you all!

Unfortunately, the sharing of the oil and gas revenues directly with those citizens whom are always told that these resources belong to them was not considered, not even as a possibility.

I did my best to remind those present that if we were to heed the wise words of Amartya Sen telling us to look for the things we share instead of what separates us, we should remember that at the last count, we are all citizens. Sadly, this did not impress many of the aspiring government, state or municipalities’ consultants, or authorities present, and so I felt that, as an oil cursed-citizen, I needed to intervene more actively. I hope the organizers will still invite me the next time.

I spoke out along the following lines:

What is more important for the future of a country, good governments or good citizens? I have no doubts whatsoever that the right answer is “good citizens”. Therefore, in an oil rich country, it is more important that the citizens learn to manage the oil-richness than thyat their governments do. But how can the citizens learn when governments thinking them to be the experts and the responsible for us, insist on managing all those resources?

Only those who have lived as cursed citizens know what the oil-curse is really all about. Only they know what it is to have an independently wealthy government which often considers the citizens to be more of a nuisance standing in the way of their grandiose plans. Only they know how easy it is for the citizens to succumb to be simple observers holding immense expectations about what oil and gas revenues will bring them.

Constitutions are written in order to defend the citizens from the excessive powers of their government. Should therefore not any methodology of sharing oil revenues between central governments, states and municipalities have as its absolute first priority that of avoiding accumulating excessive powers anywhere?

Yes I am all for transparency but, let us be sincere, quite often we know perfectly well we are being taken for a ride without needing to know the details. On occasions I have held that for an oil-cursed citizen more transparency is sometimes like having the right of also seeing when ones nails are extracted by the torturer.

Having been an Executive Director at the World Bank (2003-2004) I am perfectly aware that the World Bank works directly for the governments and only indirectly for the citizens. That said I find no reason why the World Banks needs to be so accommodative to the governments so as to sign up on the 2nd principle of the Extractive Industry Review (EITI) which states “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

The Iraq Study Group Report of May 2006 stated: “There are proposals to redistribute a portion of oil revenues directly to the population on a per capita basis. These proposals have the potential to give all Iraqi citizens a stake in the nation’s chief natural resource, but it would take time to develop a fair distribution system.... There is no institution in Iraq at present that could properly implement such a distribution system. It would take substantial time to establish, and would have to be based on a well-developed state census and income tax system, which Iraq currently lacks.”

Is it not exactly for this type of challenges that we have in the World Bank a “knowledge bank”? We all know that if there was a real will, a system to do exactly that could be designed and put in place quite expeditiously.

Finally I spend some time voicing some “wise” bullets and thumb rules.

When accounting for the government’s share, you must include what they give away, like for instance the value of the 25 percent of Venezuelan oil production that at US$ 8 cents per gallon is just given away to those who drive cars.

Having been there, I cannot see one single new proposal related to have centralized governments make better use of oil and gas revenues that has not been tried and proven to fail before.

Having been there, as a manager in the initial stages of the Venezuelan Investment Fund 1974, I know about the total worthlessness of any oil and gas fund that the governments could influence in even the most minor way… so please do not sell false potions.

Would Norway be today's Norway had they found their oil when kings were kings?

Please do not let perfection become the enemy of the good by working on turning oil and gas revenues into a blessing. Most of us citizens would feel more than blessed were we able to avoid just the worst parts of the curse.

The best way for citizens to guarantee their freedom is paying for their governments. No central government, state or municipality should receive more than 10 percent of their revenues from any other source that is not direct tax payments by the citizens.

Never provide a ruler or a bureaucrat with income that he feels he cannot be contested or held really accountable for. If governments need the revenues let them pay the full per capita oil or gas revenue check to the citizens and then explicitly withhold the taxes on such payments.

Corruption is not acceptable whether centralized or decentralized and bullies are bullies, whether in the central government, states or municipalities.

Any government that receives more than four percent of GDP in fiscal resources that have not passed through a taxpayer’s pocket becomes de-facto a communist state.

The problem is not about producing the miracle of a government that puts centralized oil and gas revenues to good use for a country and its citizens… It is about being able to repeat that miracle over and over again.

Friends, I thank you in advance for listening to me and I appreciate immensely any echoing of my voice by resending this message to anyone who could be interested in it… and to many of those who are not but should be.

Best regards

Per Kurowski
Just another oil-cursed citizen

PS. I told the conference that two of my daughters had moved to Canada, one to Ontario and the other to Quebec and that, after reading about Alberta’s centralized oil revenues, I was thankful they had not moved into another future Venezuela. Someone replied that in Alberta they would not have to pay taxes. He did not really get my drift… paying taxes is the only way a citizen can have a government that works for him... and not the other way round.