By Graham A. Davis

Inequality of opportunity leads to inequality of outcomes. For the most part, researchers of social and economic systems have determined that inequality of outcomes is detrimental to improvement in the human condition over time, and applaud policies intended to reduce such inequality. The rectifying policies, which are of relatively recent origin, are two-fold: correction of outcome-based inequality via taxation and redistribution, either directly as cash payments or indirectly in the form of social services; and correction of inequality of opportunity via directed diversity, equity, and inclusion programs. Both types of policy have come under political fire recently for being overly interventionist, with free-market rhetoric seeking a return to the relative ambivalence towards inequality that has historically been the case. 

The recent tempering of the desire to rectify inequality has not curtailed scientific interest in its causes and patterns. To this end, the harvesting and processing of natural resources is thought to increase income and social inequality both within the regions that host the natural resources, and between regions across the globe that trade in natural resources. Minerals and oil and gas are the main culprits. The “why” is poorly understood, and even the phenomenon itself is not well established statistically. Nevertheless, economies and regions rich in natural resources appear to suffer from increased inequality, to their detriment in terms of social cohesion, democracy, crime, educational outcomes, and economic growth. The hopes and aspirations that come with the discovery and monetization of scarce natural resources, resources that the whole planet seeks out for human gain, often translate into resource disappointment. The unequal distribution of natural resources across regions and countries leads to what some view as unequal exchange and the inequalities that this creates.

The study of the phenomenon linking natural resources and inequality is made difficult by three facts. The first is that the most bounteous natural resources, those whose conversion into useful products would send the strongest signal-to-noise ratio in terms of empirical documentation of the link between resources and inequality, are found in some of the least developed regions of the world. Data collection on inequality in these regions is sparse, and of poor quality. Second, outcomes are extremely diverse, suggesting that there may not be a reliable statistical pattern from which to draw overall conclusions and policy recommendations. Norway, for example, with its exemplary social welfare systems that have essentially eliminated poverty, can be compared with Venezuela, both having voluminous oil and gas deposits within their borders but very different social outcomes. Chile, with its copper and similarly successful social welfare schemes, can be compared with the Democratic Republic of the Congo, whose copper deposits are the highest quality in the world in terms of both size and grade, and yet whose citizens are for the most part impoverished. How is it that such different outcomes are evident when the alleged causal mechanism, the presence of molecules of metal and energy in the ground, are the same across these countries? Third, efforts to combat the increased inequality that comes from exploiting natural resources are poorly documented. The opacity of the natural experiment that researchers would typically look to is dense. The result is that understanding of the natural resources inequality nexus is slow to reveal itself. As a result, policy prescriptions remain vague.

‘In this timely collection, Graham Davis has assembled a fantastic team of authors to tackle some of the most contentious debates of our times around natural resource extraction and socio-economic inequality. The scale and scope of this book is global and its ambition warrants the title of “Elgar Companion” as it can be used as a one-stop volume on the topic. Scholars and practitioners in resource development will benefit from reading these contributions that cover some of the most sensitive issues in this field with clarity and nuance.’

– Saleem H. Ali, University of Delaware, USA and Member of the United Nations International Resource Panel

This Companion brings together 26 academics and scientists who have devoted their lives to studying the intersections between natural resources and inequality. The natural resources considered in the Companion range from biodiversity, to drinking water, to critical minerals, to oil and gas. The dimensions of inequality examined extend, boldly, to LGBT rights, and the divergence of these rights across regions with and without natural resources. The book seeks mainly to continue the search of statistical patterns, further illuminating regularities that can then become the basis for policy prescriptions.

If there is a consistent message that is conveyed across the book’s chapters, it is that the actions of those with political, social, and economic power appear to be the factor driving varying inequality outcomes. Regions with a long history of sound institutions, such as a functioning democracy and adequate and enforceable rule of law, and with quality educational investment for all, tend to find broad and equally shared social and economic benefit from their natural resources. Regions without tend to find immiseration and increased inequality.

The message that it is humans, and not the natural resources themselves, that drive the outcomes where inequality abounds is not surprising. Natural resources are inert, of no benefit until they are manipulated into something useful. The conundrum is that these inert resources appear to alter political and social behavior in the first place, where it is pliable, for the worse. Natural resources then become the tools of enrichment and suppression within this facilitating landscape. But then again, if this were a regularity, we should see the most barren regions of the world being the most equal. They are not.

The puzzle is complex, and we continue to assemble the pieces, slowly, incrementally. Our hope is that with the chapters in this book we advance the puzzle pieces to the extent that the puzzle’s picture becomes clearer. Better understanding of causes and pathways of the inequality that is coincident with natural resource use allows the crafting of effective corrective policies, when once again desired, as they inevitably will be.

The Elgar Companion on Inequality and Natural Resources

Edited by Graham A. Davis, Colorado School of Mines, USA

this title is available to preorder in hardback here.