The First Law of Petropolitics

Iran's president denies the Holocaust, Hugo Chávez tells Western leaders to go to hell, and Vladimir Putin is cracking the whip. Why? They know that the price of oil and the pace of freedom always move in opposite directions. It's the First Law of Petropolitics, and it may be the axiom to explain our age.

BY THOMAS L. FRIEDMAN | APRIL 25, 2006

When I heard the president of Iran, Mahmoud Ahmadinejad, declare that the Holocaust was a "myth," I couldn't help asking myself: "I wonder if the president of Iran would be talking this way if the price of oil were $20 a barrel today rather than $60 a barrel." When I heard Venezuela's President Hugo Chávez telling British Prime Minister Tony Blair to "go right to hell" and telling his supporters that the U.S.-sponsored Free Trade Area of the Americas "can go to hell," too, I couldn't help saying to myself, "I wonder if the president of Venezuela would be saying all these things if the price of oil today were $20 a barrel rather than $60 a barrel, and his country had to make a living by empowering its own entrepreneurs, not just drilling wells."

As I followed events in the Persian Gulf during the past few years, I noticed that the first Arab Gulf state to hold a free and fair election, in which women could run and vote, and the first Arab Gulf state to undertake a total overhaul of its labor laws to make its own people more employable and less dependent on imported labor, was Bahrain. Bahrain happened to be the first Arab Gulf state expected to run out of oil. It was also the first in the region to sign a free trade agreement with the United States. I couldn't help asking myself: "Could that all just be a coincidence? Finally, when I looked across the Arab world, and watched the popular democracy activists in Lebanon pushing Syrian troops out of their country, I couldn't help saying to myself: "Is it an accident that the Arab world's first and only real democracy happens not to have a drop of oil?"

The more I pondered these questions, the more it seemed obvious to me that there must be a correlation -- a literal correlation that could be measured and graphed -- between the price of oil and the pace, scope, and sustainability of political freedoms and economic reforms in certain countries. A few months ago I approached the editors of this magazine and asked them to see if we could do just that -- try to quantify this intuition in graph form. Along one axis we would plot the average global price of crude oil, and along the other axis we would plot the pace of expanding or contracting freedoms, both economic and political, as best as research organizations such as Freedom House could measure them. We would look at free and fair elections held, newspapers opened or closed, arbitrary arrests, reformers elected to parliaments, economic reform projects started or stopped, companies privatized and companies nationalized, and so on.

I would be the first to acknowledge that this is not a scientific lab experiment, because the rise and fall of economic and political freedom in a society can never be perfectly quantifiable or interchangeable. But because I am not trying to get tenure anywhere, but rather to substantiate a hunch and stimulate a discussion, I think there is value in trying to demonstrate this very real correlation between the price of oil and the pace of freedom, even with its imperfections. Because the rising price of crude is certain to be a major factor shaping international relations for the near future, we must try to understand any connections it has with the character and direction of global politics. And the graphs assembled here certainly do suggest a strong correlation between the price of oil and the pace of freedom -- so strong, in fact, that I would like to spark this discussion by offering the First Law of Petropolitics.

The First Law of Petropolitics posits the following: The price of oil and the pace of freedom always move in opposite directions in oil-rich petrolist states. According to the First Law of Petropolitics, the higher the average global crude oil price rises, the more free speech, free press, free and fair elections, an independent judiciary, the rule of law, and independent political parties are eroded. And these negative trends are reinforced by the fact that the higher the price goes, the less petrolist leaders are sensitive to what the world thinks or says about them. Conversely, according to the First Law of Petropolitics, the lower the price of oil, the more petrolist countries are forced to move toward a political system and a society that is more transparent, more sensitive to opposition voices, and more focused on building the legal and educational structures that will maximize their people's ability, both men's and women's, to compete, start new companies, and attract investments from abroad. The lower the price of crude oil falls, the more petrolist leaders are sensitive to what outside forces think of them.

I would define petrolist states as states that are both dependent on oil production for the bulk of their exports or gross domestic product and have weak state institutions or outright authoritarian governments. High on my list of petrolist states would be Azerbaijan, Angola, Chad, Egypt, Equatorial Guinea, Iran, Kazakhstan, Nigeria, Russia, Saudi Arabia, Sudan, Uzbekistan, and Venezuela. (Countries that have a lot of crude oil but were well-established states, with solid democratic institutions and diversified economies before their oil was discovered -- Britain, Norway, the United States, for example -- would not be subject to the First Law of Petropolitics.)

To be sure, professional economists have, for a long time, pointed out in general the negative economic and political impacts that an abundance of natural resources can have on a country. This phenomenon has been variously diagnosed as "Dutch Disease" or the "resource curse." Dutch Disease refers to the process of deindustrialization that can result from a sudden natural resource windfall. The term was coined in the Netherlands in the 1960s, after it discovered huge deposits of natural gas. What happens in countries with Dutch Disease is that the value of their currency rises, thanks to the sudden influx of cash from oil, gold, gas, diamonds, or some other natural resource discovery. That then makes the country's manufactured exports uncompetitive and its imports very cheap. The citizens, flush with cash, start importing like crazy, the domestic industrial sector gets wiped out and, presto, you have deindustrialization. The "resource curse" can refer to the same economic phenomenon, as well as, more broadly speaking, the way a dependence on natural resources always skews a country's politics and investment and educational priorities, so that everything revolves around who controls the oil tap and who gets how much from it -- not how to compete, innovate, and produce real products for real markets.

 SUBJECTS: OIL, POLITICS, DEMOCRACY
 

Thomas L. Friedman is a columnist for the New York Times and author of, most recently, The World Is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus & Giroux, 2005).

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