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  • Print publication year: 2010
  • Online publication date: June 2012

3 - State Ownership with Control versus Private Domestic Ownership

Summary

Supposing we had oil and gas, do you think I could get the people to do this? No … . If I had oil and gas I’d have a different people, with different motivations and expectations. It’s because we don’t have oil and gas and they know that we don’t have, and they know that this [Singapore’s economic] progress comes from their efforts.

– Lee Kwan Yew, founder and first Prime Minister of Singapore, on why he was able to motivate his citizenry to work hard and expect less from the government (Mydans and Arnold 2007).

The [resource curse] problem is exacerbated by the fact that natural resources tend to be controlled by state-run monopolies, which pretty much insures a low level of innovation and competitiveness, and encourages people to look to the state, instead of themselves, for solutions.

– James Surowiecki (2001) on why countries like Saudi Arabia are hooked on oil.

The variation in ownership structure over mineral reserves across time and space in the twentieth century documented in Chapter 1 is not just an empirical fact. It also has theoretical import because it influences the institutional outcomes that follow – specifically, whether weak, strong, or hybrid fiscal regimes emerge in mineral-rich states. In sum, we argue that ownership structure fosters distinct fiscal regimes because it generates the transaction costs (hereafter, TCs) and societal expectations that influence what kinds of rules governing taxation and spending the main claimants to the proceeds from mineral wealth prefer, and the power relations that influence how such institutions emerge, and hence whether they persist. The purpose of this chapter, therefore, is twofold: first, to clarify how we conceptualize TCs, societal expectations, and power relations, and second, to provide a theory for how each of these causal mechanisms links different forms of ownership structure to various types of fiscal regimes.

As detailed in Chapter 1, our classification yields four different ideal types of ownership structure – state ownership with control (S1), state ownership without control (S2), private domestic ownership (P1), and private foreign ownership (P2). In this chapter, we focus exclusively on what have historically been its most common and least common forms, respectively: S1 and P1. By 1970, for example, S1 had well surpassed P2 as the dominant form of ownership structure over petroleum wealth in the developing world – a position it retained for over 30 years. In contrast, over the course of the entire twentieth century, only a handful of developing countries have adopted P1.

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