Countries with natural resources invest in resource development. State wealth derives from royalties rather than from taxes paid by citizens producing products and services. No social contract between governed and governors is created. In contrast, countries without natural resources must invest in their citizens in order to generate national wealth. This establishes a social contract between taxpaying citizens and government and leads to the creation of independent worker and managerial classes as well as a significant higher education system. The components of constitutional democracy thus evolve.

Countries dependent on human resources tend to democratize fairly quickly (in historical terms) since they require constitutional protections of real and intellectual property, transparency, and freedom of human initiative. The examples of South Korea and Taiwan come to mind. Fifty years ago, both could have justifiably been termed fascist dictatorships. Today they are constitutional democracies — perhaps not on a Western model but still a long way from dictatorship. Autocratic Singapore has also had to democratize.

Even communist China has developed extensive entrepreneurial and managerial classes and has legislated guarantees regarding personal and corporate property. It is also increasingly coming in line with international standards of intellectual property. Once standards of due process and objective law “infect” any part of a legal system (usually beginning with property rights) the “infection” spreads throughout the rest of the system and concepts of human and civil rights follow quickly (in historical terms). Competition for natural resources generates instability; competition based on trade requires stability.

Let us turn to specific oil-producing countries. First, it seems obvious that Norway, Canada, and Mexico will neither invade their neighbors nor implode. Howard’s forecast of implosion, domestic unrest, and aggression against neighbors is most likely to be realized in Iraq and Nigeria.

Indonesia has recently left OPEC and become an oil importer. This seems to have had a stabilizing effect (regionally and locally) rather than the opposite. As oil production has plummeted, Indonesia has grown more democratic, with stronger constitutional protections and transparency. This is because Indonesia’s economic development now depends on increased trade of industrial products and services in the global economy. In other words, Indonesia must follow the same path as the other Asian economic miracles.

Russia has immense natural resources besides hydrocarbons. It also has highly educated human resources. Russia needs regional stability to retain China as a market for natural resources. It also needs good relations with the European Union as a market for both natural resources and the products and services generated by Russia’s human resources. Russia will need growing direct and indirect foreign investments, requiring constitutional protections and transparency — something that oil and gas revenues obviated. This will reinforce internal stability and democracy and thwart the instinct for foreign adventures.

Venezuela’s potential instability because of a substantial decline in oil revenue could be a positive: It could result in a return to the values of a middle-class democracy. As petrodollars decline, the extravagant waste of allowing the professional and managerial classes to bleed out of the country will no longer be an option.

The development of the European-Mediterranean Free Trade Zone should be a major factor in neutralizing the loss of oil revenues for Algeria and Libya. The Zone itself will act as a driver for the liberalization of all the regimes it encompasses.

All the smaller Gulf States have been proactive in diversifying their economies for more than a decade. Trade, tourism, and international corporate hubs now comprise an ever-growing portion of national economies in this region. Managerial and entrepreneurial classes have developed. International standards of transparency and legal protections for property have become the norm. Tourism has created a cosmopolitan element that is subversive to reactionary aspects of local culture — especially in regards to gender. Small populations require the employment of more educated women in the economy. Currently the gender proportions in local branches of American universities are 3 to 1 in favor of women. All this bodes well for internal stability and good relations with neighboring states as oil revenues decline.

Saudi Arabia is insular in every sense of the word. It will probably turn inward under a fundamentalist regime but will avoid regional adventurism. The small Gulf States will still be protected by American military power, and Jordan will be protected by Israel. The Saudis would have little of value to gain by invading Yemen or Aden.



Iran is a 3,000-year-old cosmopolitan civilization with a substantial educated middle class. Half its population has been born since the Islamic revolution. Many educated urban youth want to sustain good relations with the West. And, as strange as it might sound, Iran is a functioning constitutional republic run by democratic mechanisms. The political means of self-correction theoretically have been in place.

I would suggest that the disappointed expectation to honor its own constitutional principles is the driving emotional force behind the recent citizen uprising. But the power of petrodollars might enable the mullahs to suppress this citizen uprising. So, as Tom Friedman has suggested in a recent article in the New York Times, the best way the West can support the democratization of Iran is to liberate both itself and Iran from dependence on petrodollars. This might enable Iran to make the transition from oil thuggery to civilized citizen of the global community.

This article was originally published on WFS