Friday, March 23, 2012

Oil And Gas will "weaken your society in the long run unless they’re used to build schools and a culture of lifelong learning."

It's better to have nothing than to have oil according to a Tom Friedman article sent me by a friend the other day. 

Friedman writes: 
I always tell my friends in Taiwan: “You’re the luckiest people in the world. How did you get so lucky? You have no oil, no iron ore, no forests, no diamonds, no gold, just a few small deposits of coal and natural gas — and because of that you developed the habits and culture of honing your people’s skills, which turns out to be the most valuable and only truly renewable resource in the world today. How did you get so lucky?”

And later he adds this:
As the Bible notes, added Schleicher, “Moses arduously led the Jews for 40 years through the desert — just to bring them to the only country in the Middle East that had no oil. But Moses may have gotten it right, after all. Today, Israel has one of the most innovative economies, and its population enjoys a standard of living most of the oil-rich countries in the region are not able to offer.”
Most Alaskans probably wouldn't agree with this, but then most Alaskans arrived after oil was discovered and came, in part at least, because of the benefits of oil - jobs (not that many oil jobs and many who have them commute to Alaska, but the oil revenues pay for lots of State and non-profit jobs, and the oil companies and employees spend money in Alaska);  Permanent Fund Checks;  no state income or sales taxes; etc.

So, why does Friedman make this outrageous claim?
A team from the Organization for Economic Cooperation and Development, or O.E.C.D., has just come out with a fascinating little study mapping the correlation between performance on the Program for International Student Assessment, or PISA, exam — which every two years tests math, science and reading comprehension skills of 15-year-olds in 65 countries — and the total earnings on natural resources as a percentage of G.D.P. for each participating country. In short, how well do your high school kids do on math compared with how much oil you pump or how many diamonds you dig? 
The results indicated that there was a “a significant negative relationship between the money countries extract from national resources and the knowledge and skills of their high school population,” said Andreas Schleicher, who oversees the PISA exams for the O.E.C.D. “This is a global pattern that holds across 65 countries that took part in the latest PISA assessment.” Oil and PISA don’t mix. (See the data map at:
 What are some of the recent oil rich, PISA poor countries he lists?

Qatar Kazakhstan Saudi Arabia
Oman Kuwait Algeria
Iran Bahrain Syria

And the oil poor, PISA rich countries?

Singapore Finland South Korea
Hong Kong

Alaskans, are we doomed?  Not necessarily. 
Canada, Australia and Norway, also countries with high levels of natural resources, still score well on PISA, in large part, argues Schleicher, because all three countries have established deliberate policies of saving and investing these resource rents, and not just consuming them.

We have oil savings, though not nearly as much as Norway.  And while we may spend a lot per child, we have education challenges and I'd say the way we spend our education dollars is often ineffective.

The closing sentences caught my attention too:
In sum, says Schleicher, “knowledge and skills have become the global currency of 21st-century economies, but there is no central bank that prints this currency. Everyone has to decide on their own how much they will print.” Sure, it’s great to have oil, gas and diamonds; they can buy jobs. But they’ll weaken your society in the long run unless they’re used to build schools and a culture of lifelong learning. “The thing that will keep you moving forward,” says Schleicher, is always “what you bring to the table yourself.”

Now, they've paired oil and PISA scores, but that doesn't mean there's a cause and effect relationship.  There are other factors that could be at play.  The high PISA countries are all democracies and the low PISA countries range from absolute monarchies to democratic facade.  

But, the poorer education in resource rich undeveloped countries is not a new observation.  Johann Galtung, in probably the best article I read as a grad student and since, A Structural Theory of Imperialism, foretold this consequence.  The country that had its resources exploited would do worse than the country that exploited it, even if the exploiter were paying a fair price for the resource.  The reason?  The one that explains Friedman's point. 

The exploiting country has to work at a higher level of processing - it has to have the industrial, intellectual, economic, and educational infrastructures - to do the planning, exploring, financing, and processing of the resource.  It's forced to do these things.  The resource country gets its payment without having to do anything except allow the exploiter access to the resource.  It isn't forced to invest in these sorts of infrastructures.  And so it generally doesn't. 

The Galtung article, in my opinion, is brilliant in how it succinctly outlines a model of imperialist interactions which explained much of the world in the late 1960s when it came out.  It can also be used to find ways to break the relationship.  For example, he mapped out the strategy of resource producing countries to band together to demand a fair price for their resources which was precisely what OPEC eventually did.  It can also be used to explain so many of the interactions in the world.  Even though the world has shifted since he wrote it,  the model is so all-encompassing that it is still useful.  But it is very dense - in the sense that it is packed with content and requires are very careful reading.  The article is not for the intellectually timid. 


  1. I was very good at Maths and natural sciences on this PISA thing when we took it, I was much above Hungarian and world average. My reading comprehension was much worse than the other two but I was slightly above the average.

    It is important to emphasise that correlation shows only positive or negative relationship, it does not explain anything.

  2. I assume that Hungary supports the prediction. Relatively high PISA, relatively low resources?

  3. Well, we have a lot water and cows compared to the size of the country and agriculture could be good if the lads were not wasted. Medical technology and dentistry are quite advanced as well but we have no oil.

    However if the education reform will stand the education will be stricter here so we may improve our score.


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