The Resource Curse: Why Oil Made Some Nations Rich and Others Ruined | SleepWise

1
00:00:00,080 --> 00:00:04,000
Good evening and welcome back to
Sleep Wise.

2
00:00:04,360 --> 00:00:09,960
Tonight we drift into one of the
strangest and quietest puzzles

3
00:00:10,360 --> 00:00:15,360
in the modern world.
It is a puzzle hidden inside

4
00:00:15,360 --> 00:00:19,280
something most people would
consider a blessing.

5
00:00:19,640 --> 00:00:23,360
Imagine a country waking one
morning to learn that beneath

6
00:00:23,360 --> 00:00:28,960
its soil lies a treasure beyond
easy counting Vast oceans of

7
00:00:29,000 --> 00:00:34,280
oil, mountains of copper, veins
of gold threaded through ancient

8
00:00:34,280 --> 00:00:38,720
rock, diamonds resting in old
river beds.

9
00:00:39,120 --> 00:00:45,040
By every reasonable expectation,
such a discovery should mean

10
00:00:45,040 --> 00:00:51,000
lifted lives, gentler futures,
stronger schools, calmer

11
00:00:51,000 --> 00:00:55,160
streets, and the slow easing of
hardship.

12
00:00:56,000 --> 00:00:59,120
Wealth, after all, is meant to
help.

13
00:00:59,560 --> 00:01:05,040
And yet across the past century,
economists, historians and

14
00:01:05,200 --> 00:01:08,840
travelers have noticed something
unsettling.

15
00:01:09,760 --> 00:01:14,080
Again and again, countries
blessed with extraordinary

16
00:01:14,080 --> 00:01:18,920
natural riches have struggled in
ways their neighbors did not.

17
00:01:19,720 --> 00:01:24,400
They have grown more slowly than
poorer nations next door.

18
00:01:25,360 --> 00:01:30,880
They have built fewer roads,
weaker schools, less reliable

19
00:01:30,880 --> 00:01:35,000
institutions.
Their currencies have wobbled.

20
00:01:35,840 --> 00:01:39,000
Their politics have grown
brittle.

21
00:01:39,920 --> 00:01:43,960
Some have descended into
conflict.

22
00:01:44,360 --> 00:01:49,400
A few have collapsed altogether.
Despite sitting atop reserves

23
00:01:49,640 --> 00:01:53,800
worth hundreds of billions of
dollars, the pattern was so

24
00:01:53,800 --> 00:01:58,080
persistent that scholars began
giving it a name.

25
00:01:58,680 --> 00:02:01,560
They called it the Paradox of
Plenty.

26
00:02:02,160 --> 00:02:06,720
Later, more bluntly, the
resource curse to night.

27
00:02:07,200 --> 00:02:10,320
We will move slowly through this
idea.

28
00:02:11,000 --> 00:02:14,600
We will trace its mechanisms
gently, without rushing.

29
00:02:15,560 --> 00:02:19,640
We will visit a country that
lived through one of its most

30
00:02:19,640 --> 00:02:24,840
painful versions.
And then we will travel to two

31
00:02:24,840 --> 00:02:29,600
very different places that
received the same kind of gift

32
00:02:29,880 --> 00:02:35,160
and chose in their own way, to
make it a blessing rather than a

33
00:02:35,160 --> 00:02:38,360
wound.
There is no need to memorize the

34
00:02:38,360 --> 00:02:42,760
figures we encounter, no need to
keep up with every twist.

35
00:02:43,200 --> 00:02:45,840
The names, the dates, the
policies.

36
00:02:46,440 --> 00:02:51,120
They are anchors of curiosity,
not assignments to be

37
00:02:51,120 --> 00:02:54,400
remembered.
Let your breath settle a little.

38
00:02:55,000 --> 00:02:59,240
Let the day begin to loosen from
your shoulders like a coat

39
00:02:59,480 --> 00:03:02,640
slowly slipping from the back of
a chair.

40
00:03:03,040 --> 00:03:07,080
For there is something quietly
compelling about this story.

41
00:03:07,680 --> 00:03:12,040
It is not really about oil or
copper or diamonds.

42
00:03:12,720 --> 00:03:17,320
It is about what happens to a
society when sudden wealth

43
00:03:17,320 --> 00:03:23,040
arrives without preparation,
about the small daily habits

44
00:03:23,040 --> 00:03:27,480
that hold a country together,
and how easily they can be

45
00:03:27,480 --> 00:03:31,760
undone by something as simple as
a windfall.

46
00:03:32,040 --> 00:03:37,760
If these quiet journeys help you
rest, you can follow Sleep Wise

47
00:03:38,080 --> 00:03:42,480
and share it with someone who
might enjoy drifting off while

48
00:03:42,480 --> 00:03:47,680
learning something new.
And tonight, before we visit any

49
00:03:47,680 --> 00:03:53,240
country or examine any policy,
there is one question worth

50
00:03:53,240 --> 00:03:59,440
holding close, a question that
has puzzled economists for

51
00:03:59,440 --> 00:04:04,880
nearly 50 years, and one that
still does not have a single

52
00:04:05,040 --> 00:04:09,160
simple answer.
Why is it that the richest

53
00:04:09,160 --> 00:04:13,400
ground so often yields the
poorest nations?

54
00:04:15,080 --> 00:04:20,440
The term resource curse entered
the language of economics in

55
00:04:20,440 --> 00:04:27,920
1993 when a British scholar
named Richard Autie used it to

56
00:04:28,120 --> 00:04:32,040
describe a pattern he had been
studying for years.

57
00:04:32,920 --> 00:04:37,440
Autie had noticed that mineral
rich developing countries were

58
00:04:37,440 --> 00:04:42,640
performing worse than their
resource poor neighbors, often

59
00:04:42,640 --> 00:04:48,400
by surprisingly wide margins.
The name was new, but the

60
00:04:48,400 --> 00:04:54,520
observation was older.
As far back as the 1600s,

61
00:04:55,000 --> 00:05:00,760
thinkers had remarked on Spain's
strange fate, how the silver

62
00:05:00,760 --> 00:05:06,800
flowing in from the Americas had
not made Spain stronger, but had

63
00:05:06,800 --> 00:05:11,880
quietly drained its workshops
and left it poorer than smaller

64
00:05:11,880 --> 00:05:15,200
neighbors.
A few years after Audie's book,

65
00:05:15,720 --> 00:05:21,640
2 American economists Jeffrey
Sachs and Andrew Warner studied

66
00:05:21,640 --> 00:05:27,240
nearly 100 countries over
several decades and found that

67
00:05:27,240 --> 00:05:32,000
nations whose exports leaned
heavily on natural resources

68
00:05:32,720 --> 00:05:36,960
grew more slowly than those
whose economies were more

69
00:05:36,960 --> 00:05:40,920
diversified.
The relationship was not

70
00:05:40,920 --> 00:05:45,880
destiny, but it was strong
enough to demand explanation.

71
00:05:46,320 --> 00:05:50,560
The data was, in its quiet way,
startling.

72
00:05:51,160 --> 00:05:55,440
By the late 20th century, some
of the most resource rich

73
00:05:55,520 --> 00:06:01,400
nations on Earth had per capita
incomes below those of countries

74
00:06:01,400 --> 00:06:04,480
with almost no natural
endowments at all.

75
00:06:05,200 --> 00:06:10,960
South Korea, Taiwan, Singapore
and Japan, none blessed with

76
00:06:10,960 --> 00:06:15,200
significant oil or minerals, had
built some of the most

77
00:06:15,280 --> 00:06:19,240
prosperous societies in human
history.

78
00:06:19,600 --> 00:06:24,560
Meanwhile, Venezuela, sitting
atop the largest proven oil

79
00:06:24,560 --> 00:06:29,440
reserves on the planet, had seen
its economy contract again and

80
00:06:29,440 --> 00:06:34,040
again.
Nigeria, with vast oil wealth,

81
00:06:34,560 --> 00:06:36,720
struggled to keep its cities
lit.

82
00:06:37,560 --> 00:06:42,560
The Democratic Republic of the
Congo, holding rich deposits of

83
00:06:42,560 --> 00:06:47,560
cobalt and copper, remained one
of the poorest places on earth.

84
00:06:48,000 --> 00:06:53,560
There were exceptions.
Norway, Botswana, the United

85
00:06:53,560 --> 00:06:57,920
Arab Emirates and a few others
had turned natural wealth into

86
00:06:57,920 --> 00:07:03,000
broad prosperity, but these were
the minority.

87
00:07:03,640 --> 00:07:06,560
The general pattern leaned the
other way.

88
00:07:06,920 --> 00:07:10,880
The puzzle deepened when
researchers looked at history.

89
00:07:11,720 --> 00:07:16,400
The countries that had
industrialized earliest Britain,

90
00:07:16,440 --> 00:07:21,200
Germany, the United States had
built their wealth largely on

91
00:07:21,200 --> 00:07:24,920
manufacturing, trade and
innovation.

92
00:07:25,800 --> 00:07:31,240
Natural resources had been one
ingredient among many, not the

93
00:07:31,240 --> 00:07:36,000
centerpiece of the economy.
So the question sharpened.

94
00:07:36,800 --> 00:07:41,120
It was not that natural
resources caused harm directly.

95
00:07:41,760 --> 00:07:46,600
Oil does not corrode a country
the way salt corrodes iron.

96
00:07:47,480 --> 00:07:52,640
Something else was happening,
some invisible mechanism, or

97
00:07:52,640 --> 00:07:57,600
perhaps several working
together, that seemed to convert

98
00:07:57,960 --> 00:08:04,240
blessing into burden.
How did a gift become a wound?

99
00:08:05,280 --> 00:08:10,360
To begin understanding, we must
turn from the broad pattern to

100
00:08:10,360 --> 00:08:14,960
the quiet machinery beneath it,
starting with a phenomenon

101
00:08:14,960 --> 00:08:20,920
named, curiously, after a small
country in northern Europe that

102
00:08:20,920 --> 00:08:26,360
experienced it first hand.
But before we go there, consider

103
00:08:26,360 --> 00:08:30,360
this.
Of the 50 most resource rich

104
00:08:30,440 --> 00:08:35,600
nations measured at the start of
the 21st century, the majority

105
00:08:35,720 --> 00:08:41,559
were poorer, more unstable or
more unequal than the global

106
00:08:41,559 --> 00:08:44,840
average.
What had gone so quietly, so

107
00:08:44,840 --> 00:08:52,440
persistently wrong?
In 1959, in a quiet stretch of

108
00:08:52,440 --> 00:08:57,160
farmland near the village of
Slochteren in the northern

109
00:08:57,160 --> 00:09:02,440
Netherlands, engineers
discovered something unexpected.

110
00:09:03,280 --> 00:09:08,000
Beneath the soil lay one of the
largest natural gas fields ever

111
00:09:08,000 --> 00:09:12,400
found in Europe.
The Groningen field held

112
00:09:12,400 --> 00:09:17,280
trillions of cubic feet of gas.
Almost overnight, the

113
00:09:17,280 --> 00:09:20,520
Netherlands became a major
energy exporter.

114
00:09:21,240 --> 00:09:26,200
By every visible measure, the
country had been gifted a

115
00:09:26,200 --> 00:09:29,280
windfall.
And yet in the years that

116
00:09:29,280 --> 00:09:32,200
followed, something puzzling
happened.

117
00:09:32,960 --> 00:09:38,400
Dutch manufacturing, long a
backbone of the economy, began

118
00:09:38,400 --> 00:09:41,680
to decline.
Factories struggled.

119
00:09:42,000 --> 00:09:46,120
Exports of finished goods
slipped against international

120
00:09:46,120 --> 00:09:50,240
competitors.
Unemployment in manufacturing

121
00:09:50,600 --> 00:09:53,720
rose even as gas revenues
climbed.

122
00:09:54,040 --> 00:09:59,600
Economists traced the source.
As foreign buyers paid for Dutch

123
00:09:59,600 --> 00:10:03,720
gas, they had to acquire Dutch
currency to do so.

124
00:10:04,200 --> 00:10:08,320
That demand pushed the value of
the guilder upward.

125
00:10:08,920 --> 00:10:12,560
A stronger guilder meant that
everything else the Netherlands

126
00:10:12,560 --> 00:10:17,920
sold abroad became more
expensive for foreign buyers.

127
00:10:18,640 --> 00:10:23,120
A Dutch made machine that had
been competitive in Germany now

128
00:10:23,120 --> 00:10:29,200
cost more than its rivals.
Orders slowed, workshops shrank.

129
00:10:30,080 --> 00:10:34,920
The country's industrial base
began to hollow out, not because

130
00:10:34,920 --> 00:10:38,480
anything was wrong with Dutch
factories, but because the

131
00:10:38,480 --> 00:10:42,280
currency had been lifted by the
gravity of gas.

132
00:10:42,640 --> 00:10:48,640
The phenomenon was given a name
by The Economist magazine in

133
00:10:48,640 --> 00:10:54,200
1977.
They called it Dutch Disease.

134
00:10:54,840 --> 00:10:59,960
A booming resource sector can
quietly damage the rest of the

135
00:10:59,960 --> 00:11:04,880
economy by raising the
currency's value and pulling

136
00:11:04,880 --> 00:11:08,280
labor and capital toward
extraction.

137
00:11:08,640 --> 00:11:12,120
This is the first mechanism of
the resource curse.

138
00:11:12,680 --> 00:11:17,080
A country discovers oil or
copper or gas, and the wealth

139
00:11:17,080 --> 00:11:22,240
that pours in begins to undercut
the industries that might have

140
00:11:22,240 --> 00:11:25,400
provided steady jobs for
generations.

141
00:11:25,800 --> 00:11:30,480
But there is a second mechanism
layered atop the first.

142
00:11:30,960 --> 00:11:33,720
It has to do with the prices
themselves.

143
00:11:34,120 --> 00:11:40,040
Oil prices, like most commodity
prices, do not move gently.

144
00:11:40,320 --> 00:11:44,880
They swing.
They climb steeply during years

145
00:11:44,880 --> 00:11:49,360
of global demand and crash
without warning when supply

146
00:11:49,400 --> 00:11:55,480
outruns appetite.
In the 1970s, oil prices

147
00:11:55,480 --> 00:12:01,200
quadrupled in months.
In the mid 1980s, they collapsed

148
00:12:01,200 --> 00:12:06,960
by more than half.
In 2008, they reached nearly

149
00:12:06,960 --> 00:12:13,760
$150.00 a barrel before plunging
below 40 within months.

150
00:12:14,800 --> 00:12:21,440
In 2020, oil futures briefly
traded below 0.

151
00:12:21,760 --> 00:12:26,440
For a country whose budget
depends on oil revenue, these

152
00:12:26,440 --> 00:12:31,280
swings are not abstractions.
They are the difference between

153
00:12:31,280 --> 00:12:36,880
building hospitals and closing
them, between hiring teachers

154
00:12:36,880 --> 00:12:42,440
and dismissing them, between
calm streets and unrest.

155
00:12:42,800 --> 00:12:50,560
And so the second mechanism
reveals itself, quietly but

156
00:12:50,560 --> 00:12:55,200
firmly.
Resource rich economies live at

157
00:12:55,200 --> 00:13:00,920
the mercy of prices they cannot
control, set by markets they

158
00:13:00,920 --> 00:13:05,800
cannot see.
But even Dutch disease and price

159
00:13:05,800 --> 00:13:12,280
volatility, taken together, do
not fully explain why some

160
00:13:12,280 --> 00:13:18,760
nations escape and others fall.
There is a deeper force at work,

161
00:13:19,360 --> 00:13:24,920
one that touches not the economy
but the very foundations of the

162
00:13:24,920 --> 00:13:30,600
state itself.
In most countries, governments

163
00:13:30,600 --> 00:13:36,160
are funded by their citizens.
People earn wages, sell goods,

164
00:13:36,240 --> 00:13:40,200
run businesses, and pay taxes on
what they make.

165
00:13:40,640 --> 00:13:45,040
The money that flows into the
treasury comes, in a sense, from

166
00:13:45,040 --> 00:13:47,600
the daily labor of the
population.

167
00:13:48,320 --> 00:13:53,480
And because citizens pay for the
state, they tend to ask things

168
00:13:53,480 --> 00:13:56,440
of it.
They want roads where their

169
00:13:56,440 --> 00:14:00,760
children walk.
They want schools that work.

170
00:14:01,600 --> 00:14:06,720
They want courts they can trust.
The relationship between the

171
00:14:06,720 --> 00:14:12,600
taxed and the taxing is one of
the oldest and quietly most

172
00:14:12,600 --> 00:14:16,480
important arrangements in human
history.

173
00:14:16,800 --> 00:14:19,240
Now imagine a different
arrangement.

174
00:14:19,720 --> 00:14:24,640
A country discovers vast oil
reserves beneath its territory.

175
00:14:25,240 --> 00:14:30,640
The government signs contracts
with foreign companies or builds

176
00:14:30,640 --> 00:14:35,520
a national oil firm of its own,
and revenue begins to flow

177
00:14:35,520 --> 00:14:38,920
directly into the Treasury from
the ground itself.

178
00:14:39,720 --> 00:14:43,800
The state no longer depends on
its citizens for its income.

179
00:14:44,560 --> 00:14:48,840
It depends on geology and on
global markets.

180
00:14:49,840 --> 00:14:54,960
The old conversation between
taxpayer and government grows

181
00:14:54,960 --> 00:14:58,560
quieter.
This is the third mechanism of

182
00:14:58,560 --> 00:15:03,720
the resource curse, and many
economists consider it the most

183
00:15:03,720 --> 00:15:07,720
consequential.
It is sometimes called the

184
00:15:07,720 --> 00:15:12,080
rentier effect.
A rentier state is one that

185
00:15:12,240 --> 00:15:17,600
earns its keep not from
production but from rent, the

186
00:15:17,600 --> 00:15:22,280
income derived from owning a
resource and letting others

187
00:15:22,280 --> 00:15:26,040
extract it.
When such rents become large

188
00:15:26,040 --> 00:15:30,960
enough, the entire shape of
governance begins to shift.

189
00:15:31,360 --> 00:15:34,440
The first effect is on
accountability.

190
00:15:35,000 --> 00:15:39,640
When citizens do not fund the
state, the state has less reason

191
00:15:39,640 --> 00:15:43,760
to answer to them.
Tax collection requires

192
00:15:43,760 --> 00:15:48,080
negotiation, record keeping, and
public trust.

193
00:15:48,880 --> 00:15:53,760
Resource revenue requires only
contracts and pipelines.

194
00:15:54,600 --> 00:15:58,640
Governments funded by oil can,
if they choose, ignore the

195
00:15:58,640 --> 00:16:02,840
demands of ordinary people for
years at a time.

196
00:16:03,240 --> 00:16:05,880
The second effect is on
institutions.

197
00:16:06,240 --> 00:16:10,520
Strong institutions, independent
courts, free media, professional

198
00:16:10,520 --> 00:16:14,760
civil services.
Honest auditors are expensive

199
00:16:15,000 --> 00:16:20,680
and slow to build.
They emerge over decades, often

200
00:16:20,680 --> 00:16:24,840
through difficult struggles
between rulers and citizens.

201
00:16:25,600 --> 00:16:30,280
In countries where the state
lives on resource rents, the

202
00:16:30,280 --> 00:16:34,920
pressure to build such
institutions weakens.

203
00:16:35,240 --> 00:16:37,720
The third effect is on
corruption.

204
00:16:38,440 --> 00:16:43,400
Vast pools of resource revenue
create vast opportunities for

205
00:16:43,400 --> 00:16:49,360
theft, kickbacks and patronage.
A minister who overseas oil

206
00:16:49,360 --> 00:16:54,640
contracts may control more money
in a single signature than most

207
00:16:54,640 --> 00:17:00,520
citizens will see in a lifetime.
The temptation is enormous, and

208
00:17:00,520 --> 00:17:04,800
the safeguards are often the
very institutions that resource

209
00:17:04,800 --> 00:17:10,960
wealth has quietly eroded.
Studies have found that resource

210
00:17:10,960 --> 00:17:15,440
rich countries, on average,
score lower on measures of

211
00:17:15,440 --> 00:17:20,640
governance, transparency and
rule of law than countries of

212
00:17:20,640 --> 00:17:24,400
similar income that lack such
resources.

213
00:17:25,000 --> 00:17:30,160
The pattern is not absolute, but
it is consistent enough to

214
00:17:30,160 --> 00:17:35,800
suggest that the wealth itself
is shaping the politics around

215
00:17:35,800 --> 00:17:38,840
it.
And once politics is shaped this

216
00:17:38,840 --> 00:17:43,520
way, the resource curse becomes
harder to escape.

217
00:17:44,400 --> 00:17:49,680
The wealth meant to lift the
country has begun instead to

218
00:17:49,680 --> 00:17:55,200
lift the few who control it.
The word rentier comes from the

219
00:17:55,200 --> 00:17:59,840
French.
In the 18th and 19th centuries,

220
00:18:00,280 --> 00:18:04,960
A rentier was someone who lived
off the income of land or

221
00:18:04,960 --> 00:18:07,840
property without needing to
work.

222
00:18:08,960 --> 00:18:13,560
They were often modest figures,
retired teachers or small

223
00:18:13,560 --> 00:18:18,440
landlords, who had arranged
their lives around a quiet,

224
00:18:18,720 --> 00:18:24,720
dependable flow of rent.
The word implied a life shaped

225
00:18:24,800 --> 00:18:30,240
not by daily effort but by the
steady arrival of someone else's

226
00:18:30,240 --> 00:18:33,320
payments.
When scholars of political

227
00:18:33,320 --> 00:18:38,920
economy borrowed the term in the
1970s, they applied it to entire

228
00:18:38,920 --> 00:18:43,200
nations.
A rentier state, they argued, is

229
00:18:43,200 --> 00:18:48,440
1 whose government does not
produce its income but receives

230
00:18:48,440 --> 00:18:53,560
it.
Oil, gas, mineral royalties or

231
00:18:53,560 --> 00:18:59,080
sometimes foreign aid flow into
the treasury without the country

232
00:18:59,080 --> 00:19:04,240
having to build factories, train
workers or develop competitive

233
00:19:04,240 --> 00:19:08,840
industries.
The state becomes, in effect, a

234
00:19:08,840 --> 00:19:13,560
landlord on a national scale.
The scholar most closely

235
00:19:13,560 --> 00:19:19,000
associated with the idea was
Hossein Mahdavi, an Iranian

236
00:19:19,000 --> 00:19:24,720
economist who in 1970 wrote a
study of Iran's oil driven

237
00:19:24,720 --> 00:19:28,120
economy.
Mahdavi noticed that the

238
00:19:28,120 --> 00:19:32,600
structure of Iranian government
had shifted in subtle ways.

239
00:19:33,080 --> 00:19:39,040
Once oil revenue dominated the
budget, spending decisions were

240
00:19:39,040 --> 00:19:44,760
made without much consultation.
Public services expanded in some

241
00:19:44,760 --> 00:19:50,680
places and stagnated in others
according to political loyalty

242
00:19:51,160 --> 00:19:55,600
rather than economic logic.
In the decades that followed,

243
00:19:55,960 --> 00:20:01,560
scholars extended the analysis
to other oil rich states across

244
00:20:01,560 --> 00:20:05,480
the Middle East Africa.
And Latin America.

245
00:20:06,320 --> 00:20:10,880
The pattern was not identical
everywhere, but certain features

246
00:20:11,040 --> 00:20:15,440
kept recurring.
Taxes on citizens were often low

247
00:20:15,440 --> 00:20:20,000
or nonexistent, which sounded
like a gift but came with a

248
00:20:20,000 --> 00:20:24,400
hidden cost.
Without taxes, there was no

249
00:20:24,400 --> 00:20:28,680
broad civic conversation about
how revenue should be spent.

250
00:20:29,760 --> 00:20:34,200
Public sector employment grew as
a way of distributing oil

251
00:20:34,200 --> 00:20:38,120
wealth.
Subsidies on fuel and food made

252
00:20:38,120 --> 00:20:42,120
daily life cheaper, yet also
distorted markets.

253
00:20:42,480 --> 00:20:46,200
There is something almost gentle
in how this happens.

254
00:20:47,040 --> 00:20:51,520
No single official decides 1
morning to weaken the bond

255
00:20:51,520 --> 00:20:58,200
between citizen and state.
The change unfolds slowly, in

256
00:20:58,200 --> 00:21:02,600
budget meetings and personnel
decisions, in the quiet

257
00:21:02,600 --> 00:21:07,320
expansion of one ministry and
the quiet neglect of another.

258
00:21:07,600 --> 00:21:12,040
Over time, the architecture of
governance leans toward the

259
00:21:12,040 --> 00:21:16,160
wellhead rather than toward the
workshop or schoolhouse.

260
00:21:16,520 --> 00:21:21,360
And the strangest thing about a
rentier arrangement is that it

261
00:21:21,360 --> 00:21:25,320
can feel for a while like
prosperity.

262
00:21:26,040 --> 00:21:31,680
Salaries arrive, roads get
built, new airports rise from

263
00:21:31,680 --> 00:21:35,080
the desert.
The visible signs of wealth are

264
00:21:35,080 --> 00:21:41,240
real, but beneath them the deep
machinery of society may be

265
00:21:41,240 --> 00:21:45,480
quietly stalling.
By now we have walked through

266
00:21:45,480 --> 00:21:50,960
three mechanisms of the resource
curse, Dutch disease, which

267
00:21:50,960 --> 00:21:56,600
lifts the currency and hollows
out manufacturing, price

268
00:21:56,600 --> 00:22:03,200
volatility, which makes budgets
hostage to global swings, and

269
00:22:03,200 --> 00:22:07,520
the rentier effect, which
loosens the bond between

270
00:22:07,520 --> 00:22:12,320
governments and the people they
govern to see how they can act

271
00:22:12,320 --> 00:22:15,240
together.
We turn now to a country that

272
00:22:15,240 --> 00:22:19,880
lived through all three and
vivid, painful detail.

273
00:22:21,920 --> 00:22:27,160
Venezuela sits on the northern
shoulder of South America, where

274
00:22:27,160 --> 00:22:32,160
the Andes Mountains slope down
toward the Caribbean Sea.

275
00:22:33,200 --> 00:22:40,320
Its geography is varied and
beautiful, Jungle in the South,

276
00:22:40,760 --> 00:22:45,920
Savannah in the middle,
mountains in the West, and a

277
00:22:45,920 --> 00:22:50,600
long coastline.
For most of its history after

278
00:22:50,600 --> 00:22:56,960
independence from Spain in 1821,
it was a poor agricultural

279
00:22:56,960 --> 00:23:01,360
country.
Coffee, cacao, and cattle were

280
00:23:01,360 --> 00:23:06,520
its main exports.
Power rotated among regional

281
00:23:06,520 --> 00:23:10,360
strongman, and the economy
depended on the rhythms of

282
00:23:10,360 --> 00:23:14,800
harvests and the prices set in
distant European markets.

283
00:23:15,200 --> 00:23:20,240
Then, in the early 20th century,
the ground itself began to

284
00:23:20,240 --> 00:23:25,600
change the country's story.
Geologists had long suspected

285
00:23:25,960 --> 00:23:29,920
that oil lay beneath the basin
of Lake Maracaibo in the

286
00:23:29,920 --> 00:23:35,520
country's northwest, a shallow
inland sea ringed by villages of

287
00:23:35,520 --> 00:23:42,400
fishermen and farmers.
In 1914, a well drilled near the

288
00:23:42,400 --> 00:23:46,920
lake's Eastern Shore struck oil
and commercial quantities.

289
00:23:47,320 --> 00:23:52,000
The transformation that followed
was extraordinarily fast.

290
00:23:52,760 --> 00:24:00,400
In 1922, a well called Barroso 2
blew out, spewing oil into the

291
00:24:00,400 --> 00:24:03,400
air for 9 days before it could
be contained.

292
00:24:04,280 --> 00:24:08,640
The image travelled across the
world and brought a wave of

293
00:24:08,640 --> 00:24:11,680
foreign companies into
Venezuela.

294
00:24:12,360 --> 00:24:17,400
Within a decade the country had
become one of the largest oil

295
00:24:17,400 --> 00:24:21,840
exporters on earth, second only
to the United States in

296
00:24:21,840 --> 00:24:27,440
production by the late 1920's.
The man who ruled Venezuela

297
00:24:27,440 --> 00:24:33,840
during these formative years was
Juan Vicente Gomez, a long

298
00:24:33,840 --> 00:24:39,160
serving authoritarian who
governed from 19 O 8 until his

299
00:24:39,160 --> 00:24:44,000
death in 1935.
Gomez offered foreign oil

300
00:24:44,000 --> 00:24:48,160
companies extraordinarily
generous terms.

301
00:24:49,080 --> 00:24:54,520
Taxes were low, regulations were
minimal, and the laws governing

302
00:24:54,520 --> 00:24:58,720
the industry were written in
part by representatives of the

303
00:24:58,720 --> 00:25:03,080
companies themselves.
Oil revenue flowed into the

304
00:25:03,080 --> 00:25:07,840
Treasury, but Gomez used much of
it to pay off the country's

305
00:25:07,840 --> 00:25:14,720
foreign debt, enrich his family
and build an army loyal to his

306
00:25:14,720 --> 00:25:18,400
rule.
For ordinary Venezuelans, the

307
00:25:18,400 --> 00:25:22,800
early oil years brought a
peculiar mixture of change and

308
00:25:22,800 --> 00:25:27,800
stagnation.
Around Lake Maracaibo, new towns

309
00:25:27,800 --> 00:25:32,320
sprang up almost overnight,
filled with foreign engineers,

310
00:25:32,680 --> 00:25:36,560
drillers and the Venezuelan
workers who served them.

311
00:25:37,600 --> 00:25:42,480
Wages in the oil zones were
higher than anywhere else in the

312
00:25:42,480 --> 00:25:46,520
country, drawing people from the
countryside.

313
00:25:47,080 --> 00:25:51,160
But outside the oil zones,
agriculture declined.

314
00:25:51,720 --> 00:25:54,840
Workers left the fields for the
wells.

315
00:25:55,400 --> 00:26:00,680
The currency, the Bolivar,
strengthened as oil exports

316
00:26:00,680 --> 00:26:05,640
grew, making imported food
cheaper than domestically grown

317
00:26:05,640 --> 00:26:08,920
food.
Within a few decades, a country

318
00:26:08,920 --> 00:26:13,960
that had once fed itself was
importing much of what it ate.

319
00:26:14,400 --> 00:26:18,560
The pattern would have been
familiar to any student of Dutch

320
00:26:18,560 --> 00:26:21,960
disease.
Although the term did not yet

321
00:26:21,960 --> 00:26:29,040
exist, Venezuela was becoming a
country with a single dominant

322
00:26:29,080 --> 00:26:34,480
export, and the rest of its
productive economy was quietly

323
00:26:34,480 --> 00:26:38,600
shrinking in the shadow of 1
gleaming product.

324
00:26:39,040 --> 00:26:43,640
And yet, on the surface, the
country was getting richer.

325
00:26:44,320 --> 00:26:49,040
Roads were paved.
New buildings rose in Caracas,

326
00:26:49,600 --> 00:26:56,440
the oil had begun its long work.
After Gomez died in 1935,

327
00:26:56,840 --> 00:27:03,040
Venezuela began a long, uneven
process of trying to claim more

328
00:27:03,040 --> 00:27:10,040
of its own oil wealth as series
of governments gradually rewrote

329
00:27:10,040 --> 00:27:12,680
the laws governing foreign
companies.

330
00:27:13,000 --> 00:27:19,440
In 1943, a new hydrocarbons law
required that the government and

331
00:27:19,440 --> 00:27:25,000
the oil companies share profits
roughly equally, a principal

332
00:27:25,000 --> 00:27:29,920
Venezuelans.
Called 5050, it was one of the

333
00:27:29,920 --> 00:27:35,000
most progressive arrangements
between an oil producing country

334
00:27:35,720 --> 00:27:39,760
and the international firms that
drilled there.

335
00:27:40,120 --> 00:27:45,280
The 5050 principle would later
spread across the world,

336
00:27:45,760 --> 00:27:51,720
influencing oil agreements from
the Persian Gulf to Indonesia.

337
00:27:52,560 --> 00:27:58,840
Venezuela had become a model for
how a developing country might

338
00:27:58,840 --> 00:28:03,520
assert itself against the
powerful firms that had once

339
00:28:03,520 --> 00:28:08,640
written its laws.
In 1945, a brief democratic

340
00:28:08,640 --> 00:28:13,080
opening brought to power a
reformed government led by

341
00:28:13,400 --> 00:28:18,320
Romulo Betancourt.
It expanded public spending and

342
00:28:18,320 --> 00:28:22,320
tried to use oil revenue to
build a broader economy.

343
00:28:23,080 --> 00:28:25,960
But the experiment was short
lived.

344
00:28:26,840 --> 00:28:33,760
In 1948, a military coup ended
the democratic period and a

345
00:28:33,760 --> 00:28:38,440
decade of authoritarian rule
followed under Marcos Perez

346
00:28:38,440 --> 00:28:44,200
Jimenez, who used oil money to
build highways and showcase

347
00:28:44,200 --> 00:28:48,800
projects in Caracas while
suppressing opposition.

348
00:28:49,120 --> 00:28:55,320
When democracy returned in 1958,
Venezuela entered its longest

349
00:28:55,320 --> 00:29:00,800
period of stable civilian
government. 2 main political

350
00:29:00,800 --> 00:29:04,240
parties alternated peacefully in
power.

351
00:29:04,440 --> 00:29:09,360
For decades, the country was
considered one of the most

352
00:29:09,360 --> 00:29:13,640
stable democracies in Latin
America.

353
00:29:14,080 --> 00:29:19,880
A pivotal moment came in 1960
when Venezuela's oil minister,

354
00:29:20,240 --> 00:29:25,800
Juan Pablo Perez Alfonso, helped
found the Organization of the

355
00:29:25,800 --> 00:29:31,600
Petroleum Exporting Countries,
known as OPESI.

356
00:29:31,920 --> 00:29:36,600
Together with representatives
from Saudi Arabia, Iran, Iraq

357
00:29:36,800 --> 00:29:41,560
and Kuwait, he argued that
producing countries needed to

358
00:29:41,560 --> 00:29:46,080
coordinate to prevent
international companies from

359
00:29:46,080 --> 00:29:48,160
playing them against one
another.

360
00:29:49,080 --> 00:29:53,680
OPEC would become one of the
most influential cartels in

361
00:29:53,680 --> 00:29:57,760
modern history.
Perez Alfonso himself was a

362
00:29:57,760 --> 00:30:01,200
thoughtful and curiously
skeptical figure.

363
00:30:02,000 --> 00:30:07,320
Even as he helped build Opecs,
he warned his countrymen that

364
00:30:07,400 --> 00:30:12,320
oil was not really a blessing.
He called it the devil's

365
00:30:12,400 --> 00:30:17,560
excrement and predicted that an
excess of oil wealth would

366
00:30:17,560 --> 00:30:22,680
corrupt institutions and leave
Venezuela worse off than it

367
00:30:22,680 --> 00:30:26,760
might have been without it.
Few listened at the time.

368
00:30:27,160 --> 00:30:32,160
The 1970s seemed to vindicate
the cartel strategy.

369
00:30:32,920 --> 00:30:39,640
After the 1973 Arab Israeli war,
oil prices quadrupled and

370
00:30:39,640 --> 00:30:46,360
Venezuela's revenues exploded.
In 1976, the government

371
00:30:46,360 --> 00:30:51,200
nationalized the oil industry,
creating a state owned company

372
00:30:51,200 --> 00:30:56,320
called Petroleos de Venezuela,
or PDVSA.

373
00:30:58,080 --> 00:31:02,840
For a while, PDVSA was
considered one of the best run

374
00:31:02,840 --> 00:31:06,520
national oil companies in the
world.

375
00:31:06,880 --> 00:31:10,200
The country felt rich, import
surged.

376
00:31:10,600 --> 00:31:12,880
Consumer goods filled the
shelves.

377
00:31:13,440 --> 00:31:16,280
Public spending expanded
dramatically.

378
00:31:16,960 --> 00:31:21,720
Caracas became a glittering city
of new towers and busy

379
00:31:21,720 --> 00:31:25,320
restaurants.
The future seemed to belong to

380
00:31:25,320 --> 00:31:30,640
those who owned the wells.
The boom did not last.

381
00:31:31,480 --> 00:31:37,440
By the mid 1980s, oil prices had
crashed and Venezuela's economy

382
00:31:37,440 --> 00:31:41,640
contracted.
The peaceful democracy that had

383
00:31:41,640 --> 00:31:44,480
once seemed so stable began to
fray.

384
00:31:45,280 --> 00:31:48,840
Public debt rose.
Inflation climbed.

385
00:31:49,200 --> 00:31:52,800
Inequality became increasingly
visible.

386
00:31:53,400 --> 00:31:59,200
The political class dependent on
oil revenue struggled to adjust.

387
00:32:00,240 --> 00:32:05,520
By the early 1990s, ordinary
Venezuelans had grown

388
00:32:05,520 --> 00:32:09,520
disillusioned with the parties
that had governed for decades.

389
00:32:09,840 --> 00:32:14,160
Into this disillusionment
stepped a former army officer

390
00:32:14,480 --> 00:32:20,480
named Hugo Chavez.
In 1992, he led a failed

391
00:32:20,480 --> 00:32:23,960
military coup against the
elected government.

392
00:32:24,680 --> 00:32:29,000
The coup collapsed within hours
and he was jailed.

393
00:32:29,760 --> 00:32:34,880
Before being taken into custody,
he was permitted to make a brief

394
00:32:34,880 --> 00:32:39,880
televised statement urging his
fellow conspirators to

395
00:32:39,960 --> 00:32:44,840
surrender.
In that short address, he became

396
00:32:45,040 --> 00:32:49,840
a national figure.
His blunt style resonated with

397
00:32:49,840 --> 00:32:53,600
millions who felt forgotten by
the country's elite.

398
00:32:54,080 --> 00:32:59,840
Pardoned in 1994, Chavez turned
to electoral politics.

399
00:33:00,440 --> 00:33:05,440
He campaigned as an outsider,
promising to dismantle a corrupt

400
00:33:05,440 --> 00:33:10,280
system and use the country's oil
wealth for the poor.

401
00:33:11,360 --> 00:33:16,760
In 1998 he was elected
president, taking office the

402
00:33:16,760 --> 00:33:21,480
following year.
He remained in power until his

403
00:33:21,480 --> 00:33:27,600
death in 2013.
The Chavez era coincided with

404
00:33:27,600 --> 00:33:30,960
one of the longest oil booms in
modern history.

405
00:33:32,000 --> 00:33:39,280
Between 1999 and 2014, oil
prices rose from around $10 a

406
00:33:39,280 --> 00:33:46,000
barrel to well over 100.
Venezuela's revenues swelled.

407
00:33:47,040 --> 00:33:51,120
Chavez used them to fund
ambitious social programs called

408
00:33:51,360 --> 00:33:57,080
missions, which expanded health
care, literacy and food

409
00:33:57,080 --> 00:34:03,440
subsidies in poor neighborhoods.
Many Venezuelans who had felt

410
00:34:03,440 --> 00:34:07,640
invisible began to see the state
taking interest in their lives.

411
00:34:08,000 --> 00:34:12,280
Yet beneath the visible
spending, the deeper structures

412
00:34:12,280 --> 00:34:18,840
of the economy were weakening.
Chavez restaffed PDVSA, the

413
00:34:18,840 --> 00:34:23,440
national oil company, replacing
experienced engineers with

414
00:34:23,440 --> 00:34:27,280
political loyalists.
After a strike in 2002,

415
00:34:28,239 --> 00:34:33,880
production began a slow decline.
Investment and maintenance

416
00:34:33,960 --> 00:34:36,880
shrank.
The currency was kept

417
00:34:36,880 --> 00:34:41,440
artificially strong through
controls that made import cheap

418
00:34:41,800 --> 00:34:44,840
and domestic industry
uncompetitive.

419
00:34:45,679 --> 00:34:49,320
Price controls discouraged local
agriculture.

420
00:34:49,520 --> 00:34:53,520
The country imported more and
produced less, while oil masked

421
00:34:53,520 --> 00:34:56,800
the imbalance.
Chavez also weakened the

422
00:34:56,800 --> 00:35:00,800
institutions that might have
provided checks on his policies.

423
00:35:01,520 --> 00:35:05,720
Courts were packed.
Media outlets faced harassment

424
00:35:05,720 --> 00:35:09,000
or closure.
State spending was directed

425
00:35:09,000 --> 00:35:12,480
through opaque funds outside
normal oversight.

426
00:35:13,240 --> 00:35:19,200
Each move had a political logic,
but together they hollowed out

427
00:35:19,200 --> 00:35:23,640
the institutional architecture
any country needs when its

428
00:35:23,640 --> 00:35:27,640
primary revenue is as volatile
as oil.

429
00:35:28,000 --> 00:35:31,040
For a while, the model appeared
to work.

430
00:35:31,600 --> 00:35:35,240
Poverty rates fell.
Literacy improved.

431
00:35:35,800 --> 00:35:40,600
Chavez was celebrated by some
abroad as a champion of the

432
00:35:40,600 --> 00:35:44,120
poor.
But the entire edifice rested on

433
00:35:44,120 --> 00:35:47,600
one assumption no government can
guarantee.

434
00:35:48,280 --> 00:35:53,480
It rested on the assumption that
oil prices would stay high

435
00:35:53,480 --> 00:35:56,880
forever.
When Chavez died of cancer in

436
00:35:56,880 --> 00:36:03,840
2013, his chosen successor,
Nicolas Maduro, narrowly won an

437
00:36:03,840 --> 00:36:09,000
election to take his place.
The political project continued,

438
00:36:09,480 --> 00:36:14,120
but the economic foundation
beneath it was already cracking.

439
00:36:15,120 --> 00:36:19,600
Oil production, once nearly
three and a half million barrels

440
00:36:19,600 --> 00:36:25,920
a day, was drifting downward.
PDVSA was carrying enormous

441
00:36:25,920 --> 00:36:31,280
debts.
Then, in 2014, the global price

442
00:36:31,280 --> 00:36:35,160
of oil collapsed.
What had been a barrel of crude

443
00:36:35,160 --> 00:36:43,720
worth more than $100 in mid 2014
fell to under 50 by early 2015

444
00:36:44,160 --> 00:36:47,280
and below 30 within another
year.

445
00:36:48,280 --> 00:36:52,920
For a country whose budget
depended almost entirely on oil

446
00:36:52,920 --> 00:36:56,960
exports, the effect was
catastrophic.

447
00:36:57,760 --> 00:37:03,080
Roughly 95% of Venezuela's
export earnings came from

448
00:37:03,080 --> 00:37:06,680
petroleum.
When the price fell, the

449
00:37:06,680 --> 00:37:10,720
country's lifeline frayed.
The government's response

450
00:37:10,720 --> 00:37:14,760
deepened the crisis.
Rather than cutting spending or

451
00:37:14,760 --> 00:37:20,920
adjusting the currency, Maduro's
administration printed money to

452
00:37:20,920 --> 00:37:25,920
cover the shortfall.
The Bolivar lost value at an

453
00:37:25,920 --> 00:37:30,840
alarming rate.
Inflation accelerated into

454
00:37:30,840 --> 00:37:36,360
hyperinflation.
By 2018, the International

455
00:37:36,360 --> 00:37:42,520
Monetary Fund estimated that
Venezuela's annual inflation had

456
00:37:42,520 --> 00:37:49,120
passed 1,000,000%.
Wages became worthless almost as

457
00:37:49,120 --> 00:37:54,400
soon as they were paid.
Imports collapsed because the

458
00:37:54,400 --> 00:37:58,760
country had spent decades
importing nearly everything

459
00:37:59,120 --> 00:38:05,920
food, medicine, spare parts.
The shortages were immediate and

460
00:38:05,920 --> 00:38:09,240
severe.
Supermarket shelves emptied.

461
00:38:09,640 --> 00:38:12,800
Pharmacies ran out of basic
drugs.

462
00:38:13,320 --> 00:38:18,040
Hospitals lost the ability to
perform routine procedures.

463
00:38:18,440 --> 00:38:23,000
People lined up for hours for
bread, cooking oil, soap.

464
00:38:23,760 --> 00:38:26,760
Many families began losing
weight.

465
00:38:27,600 --> 00:38:33,640
A study in 2017 reported that
the average Venezuelan had lost

466
00:38:33,640 --> 00:38:39,840
roughly 20 lbs in a year, a
figure so grim it acquired its

467
00:38:39,880 --> 00:38:47,000
own name, the Maduro Diet.
Power outages spread, the

468
00:38:47,000 --> 00:38:51,920
electricity grid depended on
hydroelectric plants, and

469
00:38:52,280 --> 00:38:58,160
imported equipment no longer
being maintained, began to fail

470
00:38:58,160 --> 00:39:02,560
in waves.
Caracas, the gleaming capital of

471
00:39:02,560 --> 00:39:07,520
the boom years, sat in darkness
for days at a time.

472
00:39:08,080 --> 00:39:11,720
Water pressure dropped in some
neighborhoods.

473
00:39:12,080 --> 00:39:16,520
Residents collected drinking
water from broken pipes or

474
00:39:16,520 --> 00:39:19,960
polluted streams.
As conditions worsened,

475
00:39:20,400 --> 00:39:25,320
Venezuelans began leaving in
numbers not seen in the region's

476
00:39:25,320 --> 00:39:29,720
modern history.
By the early twenty 20s, more

477
00:39:29,720 --> 00:39:34,720
than 7 million people had left,
walking across borders into

478
00:39:34,720 --> 00:39:40,800
Colombia, Brazil, Peru, Ecuador
and beyond.

479
00:39:41,400 --> 00:39:45,480
It became one of the largest
displacement crises in the

480
00:39:45,480 --> 00:39:49,840
world, comparable in scale to
the flight from Syria.

481
00:39:50,240 --> 00:39:54,200
The country that held the
largest proven oil reserves on

482
00:39:54,200 --> 00:40:00,520
Earth had within a few short
years become one of the most

483
00:40:00,520 --> 00:40:03,320
distressed states in the
Americas.

484
00:40:04,240 --> 00:40:07,880
The collapse was not caused by
oil alone.

485
00:40:08,720 --> 00:40:13,440
Policy choices and political
decisions all played their

486
00:40:13,440 --> 00:40:18,880
roles, but the underlying
vulnerability the country's

487
00:40:18,880 --> 00:40:22,560
decades old dependence on a
single commodity.

488
00:40:23,160 --> 00:40:27,200
Was the foundation on which
everything else had been built.

489
00:40:28,240 --> 00:40:32,840
When that foundation cracked,
much of the structure came down

490
00:40:32,840 --> 00:40:37,560
with it.
It is worth pausing here for a

491
00:40:37,560 --> 00:40:43,760
moment before moving on.
Venezuela's story is not simply

492
00:40:43,760 --> 00:40:48,440
a tale of bad leaders or bad
luck, though both played their

493
00:40:48,440 --> 00:40:51,960
parts.
It is more deeply an

494
00:40:51,960 --> 00:40:56,280
illustration of how the three
mechanisms we traced earlier in

495
00:40:56,280 --> 00:41:02,760
this story can work together
slowly over generations to undo

496
00:41:02,760 --> 00:41:07,320
a country that once seemed full
of promise.

497
00:41:07,680 --> 00:41:12,560
Dutch disease arrived first.
In the early decades of the 20th

498
00:41:12,560 --> 00:41:16,400
century.
As oil flowed and the bolivars

499
00:41:16,400 --> 00:41:21,120
strengthened, Venezuelan
agriculture and manufacturing

500
00:41:21,120 --> 00:41:24,960
thinned.
The country grew more dependent

501
00:41:24,960 --> 00:41:30,720
on imports for food and finished
goods and less able to produce

502
00:41:30,720 --> 00:41:34,360
them at home.
By the time anyone gave the

503
00:41:34,360 --> 00:41:38,760
phenomenon a name, the damage
had already settled into the

504
00:41:38,760 --> 00:41:43,720
structure of the economy.
Price volatility followed close

505
00:41:43,720 --> 00:41:47,200
behind.
Every oil boom in Venezuelan

506
00:41:47,200 --> 00:41:52,760
history was followed by a price
crash, and every crash exposed

507
00:41:52,760 --> 00:41:55,480
how thin the rest of the economy
had become.

508
00:41:56,400 --> 00:42:00,600
The 70s brought riches and
overconfidence.

509
00:42:01,040 --> 00:42:04,000
The 80s brought collapse and
debt.

510
00:42:04,800 --> 00:42:10,360
The 2000s brought another surge
of revenue, and then, in 2014,

511
00:42:10,800 --> 00:42:15,080
another fall.
Each cycle drained more than

512
00:42:15,080 --> 00:42:18,840
money.
It drained the country's ability

513
00:42:18,840 --> 00:42:24,440
to plan, to save, to imagine a
future not tied to a single

514
00:42:24,440 --> 00:42:27,160
price.
The rentier effect bound

515
00:42:27,160 --> 00:42:30,880
everything together.
Because oil revenue flowed

516
00:42:30,880 --> 00:42:35,160
directly to the state,
governments could spend without

517
00:42:35,160 --> 00:42:40,840
taxing, distribute without
producing, and reward loyalty

518
00:42:41,280 --> 00:42:46,640
without much accountability.
Institutions that might have

519
00:42:46,640 --> 00:42:50,840
steadied the country, an
independent judiciary, a

520
00:42:50,840 --> 00:42:56,520
professional civil service, a
transparent budget process were

521
00:42:56,520 --> 00:43:02,360
never fully built and overtime
were actively dismantled.

522
00:43:03,520 --> 00:43:06,800
When the test came, the
structures that might have

523
00:43:06,800 --> 00:43:09,960
absorbed it were too weak to
hold.

524
00:43:10,320 --> 00:43:13,440
None of this means oil was the
only cause.

525
00:43:13,800 --> 00:43:17,920
Leaders made choices.
So did opposition figures,

526
00:43:18,200 --> 00:43:22,600
international actors and
ordinary citizens.

527
00:43:23,560 --> 00:43:27,560
Venezuela's tragedy belongs to
many hands.

528
00:43:28,280 --> 00:43:34,000
But the resource curse describes
a kind of gravity, a steady pull

529
00:43:34,000 --> 00:43:37,960
that bends a country in certain
directions unless something

530
00:43:37,960 --> 00:43:42,320
strong enough resists it.
And that brings us to the most

531
00:43:42,480 --> 00:43:48,920
interesting question of all.
If the curse exists, what does

532
00:43:48,920 --> 00:43:53,600
resistance look like?
What does a country actually do

533
00:43:53,600 --> 00:43:58,880
to receive the same gift of
natural wealth and not be undone

534
00:43:58,880 --> 00:44:02,480
by it?
To find out, we now travel to a

535
00:44:02,480 --> 00:44:06,800
place very different from
Venezuela, different in climate,

536
00:44:06,840 --> 00:44:12,920
in culture, in size, in history.
A country of long winters, deep

537
00:44:12,920 --> 00:44:19,840
fjords and small coastal towns.
A place that until quite

538
00:44:19,840 --> 00:44:24,520
recently in its history, was one
of the poorer corners of Europe,

539
00:44:24,720 --> 00:44:30,000
surviving on fishing, timber and
a stubborn maritime tradition.

540
00:44:30,360 --> 00:44:35,880
We travel to Norway and we begin
the story not in a glittering

541
00:44:35,880 --> 00:44:44,000
capital, but on a cold, grey sea
where in 1969, on a winter

542
00:44:44,000 --> 00:44:50,160
evening just before Christmas, a
discovery would change the

543
00:44:50,160 --> 00:44:56,560
country forever.
For most of its modern history,

544
00:44:56,920 --> 00:45:02,600
Norway was a country that had to
work hard for what it had carved

545
00:45:02,600 --> 00:45:07,000
out of mountains and fjords
along Europe's northwestern

546
00:45:07,000 --> 00:45:10,440
edge.
It spent centuries under the

547
00:45:10,440 --> 00:45:16,400
rule of Denmark, then Sweden,
before achieving full

548
00:45:16,400 --> 00:45:24,040
independence in 19 O 5.
Its population was small, its

549
00:45:24,040 --> 00:45:28,400
arable land limited and its
climate demanding.

550
00:45:29,280 --> 00:45:33,960
Norwegians lived from the sea
more than from the soil, and

551
00:45:33,960 --> 00:45:39,360
from timber more than from
manufacturing as late as the

552
00:45:39,360 --> 00:45:42,640
1960s.
It was one of the less

553
00:45:42,640 --> 00:45:45,240
prosperous countries in Western
Europe.

554
00:45:45,680 --> 00:45:51,760
In the late 1950s, geologists
began to wonder whether the

555
00:45:51,760 --> 00:45:56,240
floor of the North Sea, the
shallow body of water between

556
00:45:56,240 --> 00:46:01,280
Norway, Britain, Denmark and the
Netherlands, might hold oil and

557
00:46:01,280 --> 00:46:05,760
gas.
The Dutch discovery at Groningen

558
00:46:05,920 --> 00:46:12,320
in 1959 had encouraged the
question, but the sea bed off

559
00:46:12,320 --> 00:46:16,760
Norway's coast was deeper,
stormier and far harder to

560
00:46:16,760 --> 00:46:20,600
reach.
Many experts doubted that

561
00:46:20,600 --> 00:46:24,520
significant hydrocarbons would
be found in commercial

562
00:46:24,520 --> 00:46:27,320
quantities.
The Norwegian government,

563
00:46:27,800 --> 00:46:30,560
cautious by nature, took its
time.

564
00:46:31,200 --> 00:46:35,920
In 1963.
It formally declared sovereignty

565
00:46:36,480 --> 00:46:40,240
over the continental shelf in
the parts of the North Sea

566
00:46:40,520 --> 00:46:46,960
adjacent to Norway.
In 1965, it began awarding

567
00:46:46,960 --> 00:46:52,520
exploration licenses to foreign
oil companies, but on carefully

568
00:46:52,520 --> 00:46:58,280
negotiated terms that preserved
the state's right to participate

569
00:46:58,440 --> 00:47:03,560
in future discoveries.
There was no rush, no fevered

570
00:47:03,560 --> 00:47:08,240
grant of concessions.
The first wells came up dry.

571
00:47:08,600 --> 00:47:15,600
So did the 2nd and the 3rd.
Year after year, exploration

572
00:47:15,600 --> 00:47:22,480
continued without success.
By the late 1960s, some foreign

573
00:47:22,480 --> 00:47:25,640
companies had begun to lose
interest.

574
00:47:26,000 --> 00:47:33,480
Then, on the evening of December
23rd, 1969, an American firm

575
00:47:33,480 --> 00:47:38,600
called Phillips Petroleum was
preparing to wind down its

576
00:47:38,600 --> 00:47:42,680
operations on a drilling rig in
the Norwegian sector.

577
00:47:43,440 --> 00:47:48,840
The well, codenamed Eco Fisk,
had not been a priority, but the

578
00:47:48,840 --> 00:47:55,320
engineers decided to drill one
final Test before packing up.

579
00:47:56,240 --> 00:47:59,160
What they found surprised
everyone.

580
00:47:59,520 --> 00:48:04,160
Eco Fisk turned out to be one of
the largest oil and gas fields

581
00:48:04,160 --> 00:48:08,840
in the North Sea.
Beneath the cold, grey water lay

582
00:48:08,840 --> 00:48:14,240
reserves of staggering size.
Within months, the news had

583
00:48:14,240 --> 00:48:19,640
transformed Norway's prospects.
A poor coastal country on the

584
00:48:19,640 --> 00:48:26,160
edge of Europe had, almost by
accident, become a major energy

585
00:48:26,160 --> 00:48:29,240
producer.
And here, in how Norway

586
00:48:29,240 --> 00:48:33,680
responded, lies one of the most
important lessons of the

587
00:48:33,680 --> 00:48:37,520
resource curse.
Other countries had received

588
00:48:37,520 --> 00:48:43,200
similar news and rushed to
spend, to borrow, to expand.

589
00:48:44,080 --> 00:48:47,560
Norway did something different.
It paused.

590
00:48:47,880 --> 00:48:51,640
Almost from the moment of the
discovery, Norwegian

591
00:48:51,640 --> 00:48:56,640
politicians, civil servants and
economists began asking

592
00:48:56,640 --> 00:49:01,920
questions that other oil rich
states had not always thought to

593
00:49:01,920 --> 00:49:06,400
ask.
What if the boom did not last?

594
00:49:07,000 --> 00:49:10,680
What if the discovery damaged
the rest of the economy?

595
00:49:11,360 --> 00:49:15,600
What if future generations
should also benefit from this

596
00:49:15,600 --> 00:49:20,640
gift, not just the present one?
These were not abstract

597
00:49:20,640 --> 00:49:23,880
questions.
They became the foundation of

598
00:49:23,960 --> 00:49:28,000
policy.
Norway's approach to its new oil

599
00:49:28,000 --> 00:49:32,480
wealth did not arrive in a
single brilliant flash.

600
00:49:33,240 --> 00:49:38,040
It took shape over decades,
through debates in parliament,

601
00:49:38,440 --> 00:49:43,880
papers from economists and the
steady accumulation of habit.

602
00:49:44,600 --> 00:49:48,320
But certain principles emerged
early and held firm.

603
00:49:48,760 --> 00:49:53,560
The first principle was that the
oil belonged to the Norwegian

604
00:49:53,560 --> 00:49:58,080
people, not just to those alive
at the moment of discovery.

605
00:49:58,960 --> 00:50:03,600
As one early parliamentary
report put it, the petroleum on

606
00:50:03,600 --> 00:50:07,600
the continental shelf was a
common heritage.

607
00:50:08,480 --> 00:50:15,520
The state created a national oil
company, Statoil, in 1972 to

608
00:50:15,560 --> 00:50:19,840
ensure that Norwegians
themselves held a central role

609
00:50:19,880 --> 00:50:24,680
in developing the resource.
Foreign firms could participate,

610
00:50:25,240 --> 00:50:30,160
but on terms set by the state.
The second principle was that

611
00:50:30,160 --> 00:50:34,280
oil revenue should not flow
directly into ordinary

612
00:50:34,280 --> 00:50:38,880
government spending.
This was in some ways the most

613
00:50:38,880 --> 00:50:44,200
counter intuitive choice.
A poor country had suddenly

614
00:50:44,200 --> 00:50:49,960
discovered enormous wealth.
The temptation to spend it on

615
00:50:49,960 --> 00:50:53,800
better roads, more generous
benefits and immediate

616
00:50:53,800 --> 00:50:58,800
improvements in daily life was
real and politically powerful.

617
00:50:59,800 --> 00:51:04,440
But Norwegian leaders had
studied the experiences of other

618
00:51:04,560 --> 00:51:08,280
oil rich nations.
Countries that spent their

619
00:51:08,280 --> 00:51:12,520
windfalls quickly tended to
overheat their economies,

620
00:51:13,040 --> 00:51:17,640
weakened their currencies in the
wrong ways and find themselves

621
00:51:17,640 --> 00:51:23,160
stranded when prices fell.
The mechanism it built was, at

622
00:51:23,160 --> 00:51:28,240
the time, unusual.
In 1990, parliament established

623
00:51:28,240 --> 00:51:32,640
what would eventually be called
the Government Pension Fund

624
00:51:32,720 --> 00:51:37,320
Global, though it had little to
do with pensions in the ordinary

625
00:51:37,320 --> 00:51:40,840
sense.
It was a savings account for the

626
00:51:40,840 --> 00:51:45,760
nation, designed to hold the
surplus revenue from oil and

627
00:51:45,760 --> 00:51:48,960
gas.
The fund would invest that

628
00:51:48,960 --> 00:51:54,960
revenue in financial markets
outside Norway, in stocks, bonds

629
00:51:54,960 --> 00:51:57,480
and real estate around the
world.

630
00:51:58,440 --> 00:52:03,000
By keeping the money abroad, the
fund avoided pumping foreign

631
00:52:03,000 --> 00:52:06,600
currency into the domestic
economy, which would have

632
00:52:06,600 --> 00:52:11,040
strengthened the krone and
damaged Norwegian industry.

633
00:52:11,400 --> 00:52:14,480
For years.
The fund grew slowly.

634
00:52:15,120 --> 00:52:20,400
Oil prices were modest in the
1990s and Norway was still

635
00:52:20,400 --> 00:52:24,160
building the infrastructure for
its offshore industry.

636
00:52:25,240 --> 00:52:29,480
But by the 2000s, as prices rose
and production matured,

637
00:52:30,000 --> 00:52:33,080
contributions became
substantial.

638
00:52:33,760 --> 00:52:38,120
By the Twenty 20's, the
Government Pension Fund Global

639
00:52:38,640 --> 00:52:42,240
had become the largest sovereign
wealth fund in the world,

640
00:52:42,840 --> 00:52:49,040
holding assets worth more than
$1 trillion spread across

641
00:52:49,040 --> 00:52:52,080
thousands of companies and
dozens of countries.

642
00:52:52,400 --> 00:52:57,520
It owned, on average, more than
1% of every publicly traded

643
00:52:57,520 --> 00:53:01,120
company on Earth.
For a country of just over 5

644
00:53:01,120 --> 00:53:05,000
million people, this was an
extraordinary store of

645
00:53:05,000 --> 00:53:10,720
collective wealth.
It was, in effect, a buffer the

646
00:53:10,720 --> 00:53:15,600
size of an ocean.
If oil prices fell tomorrow,

647
00:53:15,920 --> 00:53:20,720
Norway would not collapse.
The fund would continue to

648
00:53:20,720 --> 00:53:25,280
generate returns, and those
returns could be drawn on

649
00:53:25,280 --> 00:53:29,160
modestly and carefully to
support public spending.

650
00:53:29,680 --> 00:53:33,120
But a savings account alone was
not enough.

651
00:53:34,040 --> 00:53:38,520
The discipline to leave the
savings alone year after year

652
00:53:38,760 --> 00:53:43,160
required a rule.
A savings account, no matter how

653
00:53:43,160 --> 00:53:49,160
vast, is only useful if its
owners can keep their hands off

654
00:53:49,160 --> 00:53:52,000
it.
Many countries have created

655
00:53:52,000 --> 00:53:54,440
sovereign wealth funds over the
years.

656
00:53:55,000 --> 00:53:58,600
Not all have managed to leave
them undisturbed.

657
00:53:59,560 --> 00:54:04,720
Politicians facing elections,
recessions or sudden popular

658
00:54:04,720 --> 00:54:10,680
demands have often dipped into
such funds more deeply than was

659
00:54:10,680 --> 00:54:16,080
wise, treating long term savings
as a cushion for short term

660
00:54:16,080 --> 00:54:19,280
troubles.
Norway tried to guard against

661
00:54:19,280 --> 00:54:23,840
this temptation by binding
itself in advance.

662
00:54:24,520 --> 00:54:29,680
In 2001, the parliament adopted
a formal fiscal rule for the use

663
00:54:29,680 --> 00:54:33,760
of oil revenue.
The rule is elegantly simple in

664
00:54:33,760 --> 00:54:37,040
its core idea.
In any given year, the

665
00:54:37,040 --> 00:54:42,040
government may spend from the
fund an amount equal to the

666
00:54:42,040 --> 00:54:46,880
expected real return on its
investments, not the underlying

667
00:54:46,880 --> 00:54:51,920
oil revenue itself.
Originally, that figure was set

668
00:54:51,920 --> 00:54:57,480
at 4%, later adjusted downward
to three per cent.

669
00:54:57,880 --> 00:55:03,960
The reasoning was patient.
If the fund grew in real terms

670
00:55:03,960 --> 00:55:08,960
by about 3 per cent a year, then
spending three per cent each

671
00:55:08,960 --> 00:55:14,080
year would draw on returns
without depleting the savings.

672
00:55:14,760 --> 00:55:19,720
The principal would remain
intact, available to future

673
00:55:19,720 --> 00:55:22,880
generations.
Norway, in other words, would

674
00:55:22,880 --> 00:55:27,920
live off the interest on its oil
wealth, not the wealth itself.

675
00:55:28,880 --> 00:55:33,480
The petroleum beneath the sea
bed was finite, but the

676
00:55:33,480 --> 00:55:36,400
financial fund could last
indefinitely.

677
00:55:36,800 --> 00:55:39,640
This was not just an accounting
convention.

678
00:55:40,080 --> 00:55:44,960
It became a binding political
commitment, defended across

679
00:55:44,960 --> 00:55:48,880
party lines and through multiple
changes of government.

680
00:55:49,800 --> 00:55:54,400
Even during difficult years when
other countries might have

681
00:55:54,400 --> 00:55:59,560
leaned more heavily on their
reserves, Norway largely held to

682
00:55:59,560 --> 00:56:03,880
the rule.
The temporary deviations during

683
00:56:03,880 --> 00:56:09,520
the global financial crisis of
2008 and again during the

684
00:56:09,520 --> 00:56:14,040
pandemic were modest and
carefully bounded.

685
00:56:14,400 --> 00:56:19,240
Just as importantly, the
institutional environment around

686
00:56:19,240 --> 00:56:23,200
the fund was designed for
transparency.

687
00:56:23,760 --> 00:56:29,040
Norway publishes detailed
reports on its oil revenues, the

688
00:56:29,040 --> 00:56:32,560
fund's investments, and its
governance.

689
00:56:33,440 --> 00:56:37,600
The Norgus Bank Investment
Management Division, which runs

690
00:56:37,600 --> 00:56:41,920
the fund, has been studied as a
model of disclosure.

691
00:56:42,480 --> 00:56:46,920
There are debates about ethical
investment policies, about

692
00:56:46,920 --> 00:56:51,000
whether the fund should hold
shares in arms manufacturers,

693
00:56:51,520 --> 00:56:56,320
fossil fuel firms or companies
linked to human rights

694
00:56:56,320 --> 00:57:00,120
violations.
These debates are public.

695
00:57:00,480 --> 00:57:04,160
That public quality is not
incidental.

696
00:57:04,880 --> 00:57:09,720
The Norwegian state had, long
before oil arrived, built habits

697
00:57:09,720 --> 00:57:15,280
of transparency, trust, and rule
of law that other resource rich

698
00:57:15,280 --> 00:57:20,480
countries had not.
Citizens paid taxes, officials

699
00:57:20,480 --> 00:57:24,360
were accountable.
Courts were independent, media

700
00:57:24,440 --> 00:57:28,120
were free.
When oil revenue began to flow,

701
00:57:28,120 --> 00:57:33,200
these institutions did not have
to be invented from scratch.

702
00:57:33,920 --> 00:57:39,120
They simply absorbed a new
responsibility into structures

703
00:57:39,320 --> 00:57:43,040
that already knew how to hold
one another to account.

704
00:57:43,440 --> 00:57:47,440
This is one of the quieter
lessons of the resource curse.

705
00:57:48,080 --> 00:57:51,920
The fund is famous, the fiscal
rule is admired.

706
00:57:52,640 --> 00:57:58,480
But beneath both lies something
older and harder to copy, a

707
00:57:58,520 --> 00:58:02,760
political culture that had
already learned how to be honest

708
00:58:02,760 --> 00:58:07,440
about money.
The fund and the fiscal rule are

709
00:58:07,440 --> 00:58:12,120
the most famous parts of
Norway's story, but they are not

710
00:58:12,120 --> 00:58:16,240
the whole of it.
Around them, Norway has built a

711
00:58:16,240 --> 00:58:21,160
wider set of habits that
together explain why oil

712
00:58:21,160 --> 00:58:24,440
enriched the country rather than
undoing it.

713
00:58:24,840 --> 00:58:29,680
One habit is investment in the
rest of the economy.

714
00:58:30,480 --> 00:58:36,160
Even as oil revenues grew,
Norway kept building industries

715
00:58:36,360 --> 00:58:39,400
that had nothing to do with
petroleum.

716
00:58:40,320 --> 00:58:44,560
The country remained a global
leader in shipping, in fish

717
00:58:44,560 --> 00:58:50,440
farming, in hydroelectric power.
Its companies in aluminum

718
00:58:50,600 --> 00:58:56,960
fertilizer and renewable energy
continued to compete on world

719
00:58:56,960 --> 00:59:01,600
markets.
Successive governments resisted

720
00:59:01,600 --> 00:59:06,080
the temptation to let the rest
of the economy wither in the

721
00:59:06,080 --> 00:59:10,520
shadow of oil.
Another habit is the careful

722
00:59:10,520 --> 00:59:15,680
management of currency.
By placing oil revenue into a

723
00:59:15,680 --> 00:59:20,760
foreign fund rather than
spending it at home, Norway

724
00:59:20,760 --> 00:59:23,760
avoided much of the Dutch
disease pressure that had

725
00:59:23,760 --> 00:59:26,680
damaged the Netherlands decades
earlier.

726
00:59:27,120 --> 00:59:31,800
The Crone did strengthen during
the oil years, but not

727
00:59:31,800 --> 00:59:36,400
catastrophically.
Norwegian manufacturers

728
00:59:36,400 --> 00:59:42,120
continued to find buyers abroad
even as their compatriots in the

729
00:59:42,160 --> 00:59:47,960
energy sector grew prosperous on
the rigs of the North Sea. 1/3

730
00:59:47,960 --> 00:59:54,000
Habit is generational thinking.
Norwegian policy documents,

731
00:59:54,240 --> 00:59:59,360
parliamentary speeches and
public debates often invoke the

732
00:59:59,360 --> 01:00:02,480
obligation to those who will
come after.

733
01:00:03,200 --> 01:00:08,720
The fund itself is framed not as
wealth for the present, but as a

734
01:00:08,720 --> 01:00:11,520
trust held on behalf of the
unborn.

735
01:00:12,240 --> 01:00:15,040
This kind of language can sound
abstract.

736
01:00:15,480 --> 01:00:20,040
But it appears repeatedly enough
in Norwegian public life to

737
01:00:20,040 --> 01:00:23,480
suggest something deeper than
rhetoric.

738
01:00:24,360 --> 01:00:29,720
It is, in its way, a national
commitment to the Longview.

739
01:00:30,000 --> 01:00:33,920
A fourth habit is moderation in
consumption.

740
01:00:34,760 --> 01:00:39,800
For a country with such a vast
sovereign fund, Norway is in

741
01:00:39,800 --> 01:00:46,360
many respects modest.
Public services are generous but

742
01:00:46,360 --> 01:00:51,400
not extravagant.
Taxes remain among the highest

743
01:00:51,720 --> 01:00:55,720
in Europe.
Houses are comfortable but not

744
01:00:55,720 --> 01:01:00,360
enormous.
Inequality exists, but the

745
01:01:00,360 --> 01:01:05,680
country has avoided the kind of
conspicuous extravagance, the

746
01:01:05,680 --> 01:01:11,080
glittering capitals, the empty
megaprojects that have marked

747
01:01:11,080 --> 01:01:17,240
some other oil states quiet.
Wealth, distributed broadly, has

748
01:01:17,240 --> 01:01:22,080
been the Norwegian pattern.
It is worth noting that Norway

749
01:01:22,080 --> 01:01:26,120
is not perfect.
Its model has critics.

750
01:01:26,680 --> 01:01:32,080
Some argue the country has been
too cautious, hoarding wealth

751
01:01:32,320 --> 01:01:36,240
that might have been spent on
faster improvements at home.

752
01:01:36,600 --> 01:01:41,080
Others note that Norway has
remained a major oil and gas

753
01:01:41,080 --> 01:01:46,360
producer even as it has
positioned itself as a climate

754
01:01:46,360 --> 01:01:52,000
conscious nation, an arrangement
that raises difficult ethical

755
01:01:52,000 --> 01:01:58,520
questions in a warming world.
The fund has had to navigate its

756
01:01:58,520 --> 01:02:03,800
own controversies around ethical
investing and political

757
01:02:03,800 --> 01:02:08,600
influence.
Yet for all that, the result is

758
01:02:08,600 --> 01:02:13,720
hard to deny.
Norway to day is among the

759
01:02:13,720 --> 01:02:18,720
wealthiest, healthiest and most
stable societies on earth.

760
01:02:19,560 --> 01:02:23,800
It has lived through the same
oil price swings that wrecked

761
01:02:23,800 --> 01:02:29,640
other economies and emerged each
time intact.

762
01:02:30,040 --> 01:02:35,760
It is, in a quiet way, what a
country looks like when it does

763
01:02:35,760 --> 01:02:40,120
not surrender to the gravity of
the curse.

764
01:02:42,320 --> 01:02:48,280
From the cold seas of the North
Sea, our journey now turns to a

765
01:02:48,280 --> 01:02:53,400
very different shore.
The southeastern edge of the

766
01:02:53,400 --> 01:02:57,920
Arabian Peninsula, where the
Persian Gulf meets the open

767
01:02:57,920 --> 01:03:04,640
ocean, is a landscape of low
sand, salt flats, mangrove

768
01:03:04,640 --> 01:03:08,200
inlets and shallow turquoise
water.

769
01:03:08,560 --> 01:03:14,160
Today, this coastline is lined
with gleaming towers, 8 lane

770
01:03:14,160 --> 01:03:18,880
highways and one of the busiest
airports in the world.

771
01:03:19,640 --> 01:03:23,240
But to understand what the
United Arab Emirates has become,

772
01:03:23,880 --> 01:03:29,080
it helps to remember what it was
not so very long ago.

773
01:03:29,480 --> 01:03:33,800
For centuries, the small
shakedoms scattered along this

774
01:03:33,800 --> 01:03:39,800
coast lived from the sea.
The Gulf's warm, shallow waters

775
01:03:40,040 --> 01:03:44,480
were home to oyster beds that
produced some of the finest

776
01:03:44,480 --> 01:03:50,680
natural pearls in the world.
Each summer, fleets of wooden

777
01:03:50,680 --> 01:03:54,560
boats called Dow's would sail
out from villages along the

778
01:03:54,560 --> 01:03:58,600
coast, carrying divers who would
descend without breathing

779
01:03:58,600 --> 01:04:03,720
equipment to gather oysters from
depths of 10 or 20 meters,

780
01:04:04,160 --> 01:04:08,040
sometimes more.
The work was dangerous and

781
01:04:08,040 --> 01:04:11,640
exhausting.
Divers wore nose clips made of

782
01:04:11,640 --> 01:04:15,440
bone or wood and weighted ropes
to help them sink.

783
01:04:16,280 --> 01:04:21,120
A boy might begin diving in his
early teens and continue for

784
01:04:21,120 --> 01:04:26,000
decades, his body marked by
injuries, infections and the

785
01:04:26,000 --> 01:04:31,320
lasting effects of the deep.
The pearls fed a global trade.

786
01:04:31,960 --> 01:04:35,800
By the early 20th century, the
Gulf provided much of the

787
01:04:35,800 --> 01:04:40,840
world's natural Pearl supply,
and the coastal towns of what

788
01:04:40,840 --> 01:04:46,800
would later become the Emirates,
places like Abu Dhabi, Dubai,

789
01:04:47,000 --> 01:04:51,640
Sharjah and Ras Al Khaimah
depended on the trade.

790
01:04:52,160 --> 01:04:55,040
It was a hard living, but a
steady one.

791
01:04:55,680 --> 01:05:00,400
Merchant families grew.
Rich communities organized

792
01:05:00,400 --> 01:05:02,920
themselves around the diving
season.

793
01:05:03,280 --> 01:05:10,240
Then, in the late 1920's, the
trade collapsed. 2 events undid

794
01:05:10,240 --> 01:05:14,800
it almost at once.
The Great Depression dried up

795
01:05:14,800 --> 01:05:19,520
demand for luxury goods around
the world, and in Japan, a

796
01:05:19,520 --> 01:05:24,760
businessman named Kokichi
Mikimoto perfected a technique

797
01:05:24,760 --> 01:05:29,880
for producing cultured pearls,
pearls grown intentionally

798
01:05:30,040 --> 01:05:33,880
inside oysters in controlled
farms.

799
01:05:34,280 --> 01:05:38,760
The cultured pearls were nearly
indistinguishable from natural

800
01:05:38,760 --> 01:05:44,000
ones and could be produced at a
fraction of the cost.

801
01:05:44,720 --> 01:05:48,520
The bottom fell out of the
natural Pearl market within a

802
01:05:48,520 --> 01:05:51,680
few years.
The consequences along the

803
01:05:51,680 --> 01:05:56,080
Trucial Coast, as the British
then called it, were severe.

804
01:05:56,800 --> 01:06:03,720
Diving fleets sat idle, merchant
fortunes evaporated, coastal

805
01:06:03,720 --> 01:06:08,960
towns emptied as families moved
inland in search of work.

806
01:06:09,880 --> 01:06:16,400
In the 1930s and 40's the region
became, by some measures, one of

807
01:06:16,400 --> 01:06:21,560
the poorest places on earth.
Most people lived in palm frond

808
01:06:21,560 --> 01:06:27,480
houses, drank from shared wells
and depended on date palms,

809
01:06:27,480 --> 01:06:32,440
modest fishing and Pearl economy
savings that were rapidly

810
01:06:32,440 --> 01:06:35,720
running out.
This was the world into which

811
01:06:35,760 --> 01:06:40,160
oil would soon arrive.
A world of small Emirates,

812
01:06:40,280 --> 01:06:45,520
mostly nomadic and coastal
populations, no formal nation

813
01:06:45,960 --> 01:06:50,480
and very little infrastructure.
The future that the world now

814
01:06:50,480 --> 01:06:54,800
associates with the Emirates was
not yet imaginable.

815
01:06:55,440 --> 01:07:01,320
It had to be built almost from
nothing on the bones of a fallen

816
01:07:01,360 --> 01:07:04,600
industry.
And the first step toward that

817
01:07:04,600 --> 01:07:09,520
future was political.
Oil was first found beneath the

818
01:07:09,520 --> 01:07:16,720
Gulf in 1932 in nearby Bahrain.
Over the next decades,

819
01:07:17,200 --> 01:07:21,240
exploration moved gradually
along the Arabian coast.

820
01:07:22,280 --> 01:07:26,040
Geologists suspected that the
Sheikhdams along the Trucial

821
01:07:26,040 --> 01:07:31,680
Coast might also hold petroleum,
but early surveys produced

822
01:07:31,680 --> 01:07:36,480
little.
It was not until 1958 that a

823
01:07:36,480 --> 01:07:40,960
major discovery was made
offshore from Abu Dhabi at a

824
01:07:40,960 --> 01:07:47,440
field called Umm Shaif.
Commercial exports began in

825
01:07:47,440 --> 01:07:52,200
1962.
Almost overnight, Abu Dhabi

826
01:07:52,200 --> 01:07:56,640
found itself in possession of
vast oil reserves.

827
01:07:57,000 --> 01:08:02,400
The ruler at the time was Sheikh
Shahbut bin Sultan Al Nahyan.

828
01:08:03,000 --> 01:08:08,520
He was famously cautious about
the new wealth he had seen in

829
01:08:08,520 --> 01:08:13,160
his lifetime, the Pearl trade,
rise and fall.

830
01:08:13,760 --> 01:08:19,479
He distrusted sudden riches
Sheikh Shahbut kept much of the

831
01:08:19,479 --> 01:08:25,000
early oil revenue locked away,
sometimes literally in a chest

832
01:08:25,200 --> 01:08:31,640
beneath his bed, rather than
spending it on roads, schools or

833
01:08:31,640 --> 01:08:37,680
hospitals.
To him, oil money was unfamiliar

834
01:08:38,040 --> 01:08:42,399
and dangerous.
But the population of Abu Dhabi

835
01:08:43,000 --> 01:08:47,760
was changing.
People were beginning to expect

836
01:08:47,760 --> 01:08:50,840
more.
They saw the wealth and wondered

837
01:08:50,840 --> 01:08:53,680
why their lives remained so
plain.

838
01:08:54,520 --> 01:08:59,920
By the mid 1960's, the country's
elite, with British

839
01:08:59,920 --> 01:09:05,520
encouragement, decided a
different leadership was needed.

840
01:09:06,560 --> 01:09:13,160
In 1966, Sheikh Shahbut was
peacefully replaced by his

841
01:09:13,160 --> 01:09:18,160
younger brother, Sheikh Zayed
bin Sultan Al Nahyan.

842
01:09:18,520 --> 01:09:23,279
Sheikh Zayed would shape the
history of the Emirates more

843
01:09:23,279 --> 01:09:26,279
deeply than any other single
figure.

844
01:09:27,120 --> 01:09:31,960
He had governed the inland Oasis
town of Al Ain for many years,

845
01:09:32,640 --> 01:09:38,040
and he had a clear sense of what
oil revenue could do if used

846
01:09:38,040 --> 01:09:42,200
carefully.
Almost immediately, he began

847
01:09:42,200 --> 01:09:46,760
investing in roads, water
systems, schools and hospitals.

848
01:09:47,600 --> 01:09:51,120
He distributed land.
He built housing.

849
01:09:52,160 --> 01:09:57,400
The transformation of Abu Dhabi
from a small coastal town into a

850
01:09:57,400 --> 01:10:03,000
modern city began in earnest
under his rule.

851
01:10:03,280 --> 01:10:07,240
Sheikh Zayed also turned his
attention outward.

852
01:10:08,280 --> 01:10:14,240
The seven small sheikhdoms along
the coast, Abu Dhabi, Dubai,

853
01:10:14,640 --> 01:10:22,960
Sharjah, Ajman, Umm Al Qawain,
Fujairah and Ras Al Qaimah had

854
01:10:22,960 --> 01:10:27,400
long been linked by trade,
kinship and dependence on

855
01:10:27,400 --> 01:10:31,240
Britain for defence.
As Britain prepared to withdraw

856
01:10:31,240 --> 01:10:36,440
from the Gulf at the end of
1971, Sheikh Zayed worked

857
01:10:36,480 --> 01:10:40,640
patiently with the other rulers
to bring most of them into a

858
01:10:40,640 --> 01:10:47,880
single federation.
On December 2nd, 1971, six

859
01:10:47,880 --> 01:10:51,160
Emirates formed the United Arab
Emirates.

860
01:10:51,840 --> 01:10:55,720
Ras Al Khaimah joined the
following year.

861
01:10:56,040 --> 01:11:01,080
Sheikh Zayed became the 1st
president of the new country, a

862
01:11:01,080 --> 01:11:06,520
position he would hold until his
death in 2004.

863
01:11:07,560 --> 01:11:11,760
The federation was an unusual
arrangement, a union of

864
01:11:11,760 --> 01:11:16,080
monarchies with shared
institutions but considerable

865
01:11:16,080 --> 01:11:20,800
local autonomy.
Each emirate kept its own ruler,

866
01:11:20,880 --> 01:11:23,240
its own laws and its own
resources.

867
01:11:23,800 --> 01:11:28,880
Abu Dhabi, with the most oil,
would carry the heaviest share

868
01:11:28,880 --> 01:11:33,960
of national spending.
The others would chart their own

869
01:11:33,960 --> 01:11:38,440
paths.
For Dubai with only modest oil

870
01:11:38,440 --> 01:11:43,120
reserves, this meant finding a
very different strategy.

871
01:11:43,640 --> 01:11:50,600
Dubai had been ruled since 1958
by Sheikh Rashid bin Saeed Al

872
01:11:50,600 --> 01:11:54,760
Maktoum.
Sheikh Rashid was a different

873
01:11:54,760 --> 01:11:59,520
kind of leader, where Sheikh
Zayed presided over enormous oil

874
01:11:59,520 --> 01:12:03,880
reserves and the responsibility
of a national budget.

875
01:12:04,680 --> 01:12:09,400
Sheikh Rashid governed a smaller
emirate with far less oil

876
01:12:09,400 --> 01:12:12,160
beneath it.
Dubai's first commercial

877
01:12:12,160 --> 01:12:18,520
petroleum exports began in 1969,
modest compared with Abu

878
01:12:18,520 --> 01:12:22,160
Dhabi's.
Sheikh Rashid understood,

879
01:12:22,680 --> 01:12:26,920
perhaps earlier than anyone else
along the coast, that his

880
01:12:26,920 --> 01:12:31,760
Emirates oil would not last.
He is often quoted as saying.

881
01:12:32,280 --> 01:12:37,000
My grandfather rode a Camel, my
father rode a Camel, I drive a

882
01:12:37,000 --> 01:12:42,480
Mercedes, my son drives a Land
Rover, my grandson will drive a

883
01:12:42,480 --> 01:12:46,880
Land Rover, but my great
grandson will ride a Camel.

884
01:12:47,920 --> 01:12:52,560
The line captured a clear eyed
view of resource impermanence.

885
01:12:53,000 --> 01:12:57,400
To prepare for that future,
Sheikh Rashid spent his oil

886
01:12:57,400 --> 01:13:03,200
revenue and significant borrowed
money on infrastructure that

887
01:13:03,200 --> 01:13:08,720
would outlast the wells.
The first great project was the

888
01:13:08,720 --> 01:13:13,920
dredging of Dubai Creek, the
salt water inlet around which

889
01:13:13,920 --> 01:13:19,720
the original town had grown.
Through the 1950s and 60's, the

890
01:13:19,720 --> 01:13:24,840
Creek had been silting up,
threatening the Dow trade that

891
01:13:24,840 --> 01:13:29,920
connected Dubai with India, Iran
and East Africa.

892
01:13:30,840 --> 01:13:35,480
Sheikh Rashid commissioned
engineers to deepen the channel

893
01:13:35,720 --> 01:13:40,960
and turn the Creek into a usable
port for larger vessels.

894
01:13:41,360 --> 01:13:47,760
Then came Port Rashid, a modern
deep water container port opened

895
01:13:47,760 --> 01:13:52,480
in 1972 on land reclaimed from
the Gulf.

896
01:13:53,320 --> 01:13:59,680
It was followed in the late
1970s by Jebel Ali, a far more

897
01:13:59,680 --> 01:14:04,280
ambitious project.
An artificial deep water harbor

898
01:14:04,560 --> 01:14:09,320
and free trade zone built on
what was then empty desert South

899
01:14:09,320 --> 01:14:14,640
of the city, Jebel Ali became
one of the largest man made

900
01:14:14,640 --> 01:14:19,560
harbors in the world.
The free zone allowed foreign

901
01:14:19,560 --> 01:14:25,000
companies to operate with full
ownership, unusual in the region

902
01:14:25,000 --> 01:14:30,920
at the time, drawing investment
from Asia, Europe and the Middle

903
01:14:30,920 --> 01:14:34,640
East.
Sheikh Rashid also invested in

904
01:14:34,640 --> 01:14:38,840
aviation.
Dubai's first airport had opened

905
01:14:38,840 --> 01:14:46,120
in 1960 as a small airstrip.
Most striking was the founding

906
01:14:46,120 --> 01:14:51,760
of Emirates Airline in 1985.
Launched with two leased

907
01:14:51,760 --> 01:14:56,280
aircraft, Emirates would grow
into one of the largest long

908
01:14:56,280 --> 01:15:01,560
haul carriers on earth, with
Dubai International eventually

909
01:15:01,560 --> 01:15:06,480
becoming the world's busiest hub
for international travel.

910
01:15:06,840 --> 01:15:12,520
Sheikh Rashid died in 1990 and
his sons continued the strategy.

911
01:15:13,400 --> 01:15:17,560
The next generation,
particularly Sheikh Mohammed bin

912
01:15:17,560 --> 01:15:22,880
Rashid Al Maktoum, expanded the
vision dramatically.

913
01:15:23,560 --> 01:15:27,800
Real estate, tourism, finance,
technology, retail and

914
01:15:27,800 --> 01:15:32,920
conferences became central.
Dubai built artificial islands

915
01:15:32,920 --> 01:15:36,960
shaped like palms, the tallest
building in the world, the

916
01:15:36,960 --> 01:15:41,560
busiest mall on earth, and a
financial district modeled on

917
01:15:41,560 --> 01:15:46,400
London and New York.
The result was a city state

918
01:15:46,880 --> 01:15:51,080
whose oil revenue had become
almost incidental.

919
01:15:51,680 --> 01:15:56,920
By the Twenty 20s, petroleum
accounted for less than 1% of

920
01:15:56,920 --> 01:16:03,760
Dubai's gross domestic product.
The emirate had, in effect, used

921
01:16:03,760 --> 01:16:08,880
modest hydrocarbons to fund an
escape from hydrocarbons.

922
01:16:09,280 --> 01:16:14,200
While Dubai built its harbors
and airports, Abu Dhabi pursued

923
01:16:14,200 --> 01:16:17,800
a quieter but equally
consequential strategy.

924
01:16:18,640 --> 01:16:22,800
With its much larger oil
reserves, Abu Dhabi could afford

925
01:16:22,800 --> 01:16:25,120
to think on longer time
horizons.

926
01:16:25,880 --> 01:16:32,520
In 1976, only five years after
the federation was formed, the

927
01:16:32,560 --> 01:16:36,280
emirate established the Abu
Dhabi Investment Authority,

928
01:16:36,680 --> 01:16:42,480
known by its initials Adia.
It was one of the first

929
01:16:42,480 --> 01:16:47,960
sovereign wealth funds in the
world, predating Norway's by

930
01:16:47,960 --> 01:16:52,560
more than a decade.
The idea behind Adia was simple.

931
01:16:53,000 --> 01:16:56,800
Oil revenue would not be spent
only on present needs.

932
01:16:57,120 --> 01:17:02,120
A substantial portion would be
invested abroad in stocks,

933
01:17:02,440 --> 01:17:07,600
bonds, real estate and
infrastructure across the globe.

934
01:17:08,280 --> 01:17:13,000
The returns would generate
income long after the wells ran

935
01:17:13,000 --> 01:17:16,960
dry.
By the Twenty 20s, ADA was

936
01:17:16,960 --> 01:17:23,080
estimated to manage assets worth
several $100 billion, though the

937
01:17:23,080 --> 01:17:26,800
exact figure remained famously
opaque.

938
01:17:27,880 --> 01:17:34,120
Other Emirati funds followed,
including Mubadala and ADQ, each

939
01:17:34,120 --> 01:17:37,320
directing oil wealth into global
investment.

940
01:17:37,760 --> 01:17:43,640
Beyond sovereign wealth, the UAE
built layers of diversification

941
01:17:43,640 --> 01:17:46,640
that other oil states had rarely
attempted.

942
01:17:47,560 --> 01:17:51,240
Tourism became a deliberate
national project.

943
01:17:51,960 --> 01:17:56,040
Dubai marketed itself as a
destination for travelers from

944
01:17:56,040 --> 01:18:01,360
Europe, India, Russia and East
Asia, building luxury hotels,

945
01:18:01,360 --> 01:18:03,560
theme parks and shopping
districts.

946
01:18:04,400 --> 01:18:08,560
Abu Dhabi pursued a different
angle, branding itself around

947
01:18:08,560 --> 01:18:14,960
culture, opening a branch of the
Louvre on Sadiat Island in 2017.

948
01:18:15,320 --> 01:18:19,840
Finance also grew.
The Dubai International

949
01:18:19,840 --> 01:18:26,280
Financial Center opened in 2004,
designed as a regulatory zone

950
01:18:26,640 --> 01:18:31,080
aligned with international
standards, attracting banks, law

951
01:18:31,080 --> 01:18:35,560
firms and asset managers from
across the world.

952
01:18:36,320 --> 01:18:40,160
Abu Dhabi Global Market followed
in 2015.

953
01:18:40,760 --> 01:18:46,760
Together, they made the UAE one
of the leading financial hubs of

954
01:18:46,760 --> 01:18:51,000
the Middle East.
Logistics tied the strategy

955
01:18:51,000 --> 01:18:55,720
together.
Jebel Ali Port grew into one of

956
01:18:55,720 --> 01:18:58,680
the busiest container terminals
on earth.

957
01:18:59,640 --> 01:19:04,040
Emirates and Etihad Airlines
connected hundreds of cities

958
01:19:04,320 --> 01:19:09,800
through the 2 main airports.
Dubai Ports World, a state

959
01:19:09,800 --> 01:19:14,240
linked operator, expanded to
manage terminals on every

960
01:19:14,240 --> 01:19:19,040
inhabited continent.
The country positioned itself as

961
01:19:19,040 --> 01:19:24,160
the natural intermediary between
Asia, Europe and Africa.

962
01:19:24,560 --> 01:19:29,400
There were also industrial
investments, aluminum smelters

963
01:19:29,400 --> 01:19:34,920
in Abu Dhabi, petrochemicals
along the coast, renewable

964
01:19:34,920 --> 01:19:39,840
energy projects including the
Masdar initiative, which

965
01:19:39,840 --> 01:19:42,920
announced ambitious plans for
solar power.

966
01:19:43,720 --> 01:19:48,080
None of these by themselves
transformed the economy.

967
01:19:48,880 --> 01:19:53,520
Together they reduced the
country's exposure to any single

968
01:19:53,520 --> 01:19:56,760
revenue source.
By the 20 twenties.

969
01:19:57,080 --> 01:20:02,040
Oil and gas still mattered to
the UAE, particularly in Abu

970
01:20:02,040 --> 01:20:06,280
Dhabi, where most of the
national hydrocarbon reserves

971
01:20:06,280 --> 01:20:11,160
are located, but the share of
the overall economy directly

972
01:20:11,160 --> 01:20:14,200
tied to petroleum had fallen
substantially.

973
01:20:14,880 --> 01:20:19,160
Services, trade, tourism,
finance.

974
01:20:19,600 --> 01:20:24,840
Real estate and aviation had
taken on weights few had

975
01:20:24,840 --> 01:20:30,840
imagined possible in the 1970's.
The country had used its oil.

976
01:20:31,560 --> 01:20:35,520
It had not, in the end, been
used by it.

977
01:20:35,960 --> 01:20:41,880
It is worth pausing to ask how
the UAE managed what so many

978
01:20:41,880 --> 01:20:48,240
other oil states did not.
The country is not a democracy

979
01:20:48,640 --> 01:20:53,680
in the Norwegian sense.
It does not publish the detailed

980
01:20:53,680 --> 01:20:58,320
accounts of its sovereign wealth
funds the way Oslo does.

981
01:20:58,640 --> 01:21:03,240
It has serious critics,
particularly on questions of

982
01:21:03,240 --> 01:21:08,640
Labor rights, political openness
and the treatment of migrant

983
01:21:08,640 --> 01:21:12,240
workers.
And yet, when measured against

984
01:21:12,240 --> 01:21:17,920
the mechanisms of the resource
curse we traced earlier, the UAE

985
01:21:17,920 --> 01:21:21,520
has by most standards escaped
them.

986
01:21:21,920 --> 01:21:26,360
Consider Dutch disease.
The Emirati economy did not

987
01:21:26,360 --> 01:21:30,440
hollow out around oil.
It diversified outward with

988
01:21:30,640 --> 01:21:35,360
deliberation.
Aviation, logistics, finance,

989
01:21:35,360 --> 01:21:40,120
tourism, real estate and trade
now contribute the bulk of the

990
01:21:40,120 --> 01:21:45,360
country's economic activity.
Foreign workers, who make up the

991
01:21:45,360 --> 01:21:50,120
majority of the population, fill
rolls across nearly every

992
01:21:50,120 --> 01:21:54,960
sector, allowing the economy to
grow far beyond what a small

993
01:21:54,960 --> 01:22:00,080
Emirati citizen population could
have sustained alone.

994
01:22:01,040 --> 01:22:06,960
This arrangement raises its own
difficult questions, but it has

995
01:22:06,960 --> 01:22:10,880
worked to prevent the narrow
dependence that trapped other

996
01:22:10,920 --> 01:22:14,680
oil states.
Consider price volatility.

997
01:22:15,200 --> 01:22:19,600
The UAE has weathered every
major oil price crash since the

998
01:22:19,600 --> 01:22:22,960
1970's.
The federation has not

999
01:22:22,960 --> 01:22:26,720
collapsed.
Public services have continued

1000
01:22:26,720 --> 01:22:32,040
to function, construction
projects have paused at times

1001
01:22:32,640 --> 01:22:36,600
and budgets adjusted.
But the country has never

1002
01:22:36,600 --> 01:22:41,040
experienced the kind of collapse
Venezuela suffered.

1003
01:22:42,040 --> 01:22:46,320
The buffer of accumulated
sovereign wealth combined with

1004
01:22:46,320 --> 01:22:50,840
diversified revenue, has
absorbed shocks that would have

1005
01:22:50,840 --> 01:22:53,400
shattered a less prepared
economy.

1006
01:22:53,760 --> 01:22:59,520
Consider the rentier effect.
This is where the UAE story

1007
01:22:59,520 --> 01:23:04,120
becomes most complicated.
Its citizens pay no personal

1008
01:23:04,120 --> 01:23:07,480
income tax.
The state provides generous

1009
01:23:07,480 --> 01:23:12,600
benefits, free education,
subsidized housing and well paid

1010
01:23:12,600 --> 01:23:17,520
public sector jobs.
By classic theory, this should

1011
01:23:17,520 --> 01:23:22,280
produce weak institutions and
disengaged citizens.

1012
01:23:22,600 --> 01:23:27,840
And yet, in practice, the
Emirati state has built an

1013
01:23:27,840 --> 01:23:31,840
unusually competent
administrative apparatus.

1014
01:23:32,720 --> 01:23:38,000
Ministries, function,
infrastructure works, public

1015
01:23:38,000 --> 01:23:43,160
services are delivered.
The country has invested heavily

1016
01:23:43,160 --> 01:23:47,400
in education and in capacity
building within the government

1017
01:23:47,400 --> 01:23:51,600
itself.
The UAE solution to the rentier

1018
01:23:51,600 --> 01:23:55,680
challenge has been to
professionalize the state

1019
01:23:55,960 --> 01:24:01,120
without democratizing it.
Whether that solution is stable

1020
01:24:01,120 --> 01:24:07,000
in the long run is a serious
question, but in the time frame

1021
01:24:07,320 --> 01:24:11,120
we have observed, it has
produced one of the most

1022
01:24:11,120 --> 01:24:14,320
efficient governments in the
Middle East.

1023
01:24:14,720 --> 01:24:17,840
There is also a cultural
element.

1024
01:24:18,640 --> 01:24:24,320
The Emirati leadership from
Sheikh Zayed onward has spoken

1025
01:24:24,360 --> 01:24:28,040
openly and repeatedly about life
after oil.

1026
01:24:29,000 --> 01:24:35,160
The vocabulary of post petroleum
economies is not confined to

1027
01:24:35,200 --> 01:24:40,360
think tank reports.
It appears in official speeches,

1028
01:24:40,640 --> 01:24:45,440
school curricula and national
strategy documents.

1029
01:24:46,360 --> 01:24:52,560
The expectation that oil will
not last forever has been woven

1030
01:24:52,800 --> 01:24:56,840
deliberately into the country's
self-image.

1031
01:24:57,240 --> 01:25:02,880
In that sense, the UAE has done
something Venezuela never did.

1032
01:25:03,640 --> 01:25:09,800
It has chosen again and again
never to take its own resource

1033
01:25:09,800 --> 01:25:14,600
for granted.
The UA ES success did not unfold

1034
01:25:14,600 --> 01:25:17,800
in isolation.
The countries of the Gulf

1035
01:25:17,800 --> 01:25:24,640
Cooperation Council, founded in
1981, share many features Small

1036
01:25:24,640 --> 01:25:28,520
native populations, vast
hydrocarbon wealth.

1037
01:25:28,960 --> 01:25:33,880
Similar monarchic political
systems, dependence on foreign

1038
01:25:33,880 --> 01:25:40,280
workers and proximity to the
same shipping lanes as the

1039
01:25:40,320 --> 01:25:45,600
Emirati model demonstrated that
diversification was possible.

1040
01:25:46,200 --> 01:25:48,640
Other Gulf states began to
follow.

1041
01:25:48,920 --> 01:25:53,880
Saudi Arabia, by far the largest
oil producer in the region,

1042
01:25:54,320 --> 01:25:58,360
watched its smaller neighbor
with growing interest.

1043
01:25:59,160 --> 01:26:03,920
For decades, the Kingdom had
relied almost entirely on

1044
01:26:03,920 --> 01:26:09,480
petroleum revenue, producing
fewer than 2% of its export

1045
01:26:09,480 --> 01:26:12,880
earnings from anything other
than oil.

1046
01:26:13,600 --> 01:26:20,120
In 2016, under Crown Prince
Mohammed bin Salman, the

1047
01:26:20,120 --> 01:26:25,600
government unveiled an ambitious
plan called Vision 2030.

1048
01:26:26,000 --> 01:26:29,760
The strategy borrowed openly
from the Emirati playbook.

1049
01:26:30,320 --> 01:26:35,400
It called for the expansion of
tourism, entertainment, mining,

1050
01:26:35,720 --> 01:26:41,520
technology and renewable energy.
It restructured the kingdom's

1051
01:26:41,520 --> 01:26:45,640
sovereign wealth fund into one
of the largest pools of

1052
01:26:45,640 --> 01:26:51,320
investment capital in the world.
Saudi Arabia is trying with

1053
01:26:51,400 --> 01:26:55,760
urgency to escape its dependence
on oil.

1054
01:26:56,080 --> 01:27:00,800
Qatar followed a different path,
oriented around natural gas.

1055
01:27:01,680 --> 01:27:07,000
The country sits atop the North
Field, the largest natural gas

1056
01:27:07,000 --> 01:27:10,080
reservoir on earth shared with
Iran.

1057
01:27:11,000 --> 01:27:15,920
From the late 1990s onward,
Qatar invested heavily in

1058
01:27:15,920 --> 01:27:20,680
liquefied natural gas, becoming
one of the world's leading

1059
01:27:20,680 --> 01:27:24,000
exporters.
It also built sovereign wealth

1060
01:27:24,000 --> 01:27:29,840
funds, an international airline,
a global media network in Al

1061
01:27:29,840 --> 01:27:33,600
Jazeera and major investments
abroad.

1062
01:27:34,440 --> 01:27:41,480
Hosting the FIFA World Cup in
2022 was both a showcase and a

1063
01:27:41,480 --> 01:27:45,760
strategy.
Bahrain, with smaller oil

1064
01:27:45,760 --> 01:27:50,240
reserves, became one of the
earliest regional financial

1065
01:27:50,240 --> 01:27:55,960
centers, though it has struggled
in recent decades with political

1066
01:27:55,960 --> 01:27:58,760
tensions and competition from
Dubai.

1067
01:27:59,760 --> 01:28:04,640
Kuwait built one of the world's
oldest sovereign wealth funds,

1068
01:28:05,160 --> 01:28:10,800
the Kuwait Investment Authority.
Established in 1953.

1069
01:28:11,360 --> 01:28:17,800
Even before formal independence
from Britain, Oman has pursued A

1070
01:28:17,800 --> 01:28:24,360
steadier diversification through
tourism, ports and logistics,

1071
01:28:24,960 --> 01:28:28,000
drawing on a long maritime
tradition.

1072
01:28:28,320 --> 01:28:32,520
None of these countries have
escaped oil dependence as fully

1073
01:28:32,520 --> 01:28:37,160
as the UAE.
The economic transitions remain

1074
01:28:37,360 --> 01:28:43,320
incomplete, and rising tensions,
demographic pressures and

1075
01:28:43,320 --> 01:28:47,240
climate concerns add new layers
of difficulty.

1076
01:28:47,840 --> 01:28:50,480
But the broader pattern is
striking.

1077
01:28:50,840 --> 01:28:55,760
Across the Arabian Peninsula,
the assumption that hydrocarbons

1078
01:28:55,760 --> 01:29:00,040
would fund every future has
given way to a more

1079
01:29:00,040 --> 01:29:05,160
forward-looking question.
What will these countries do

1080
01:29:05,160 --> 01:29:08,640
when the oil and gas eventually
fade?

1081
01:29:09,040 --> 01:29:14,560
The UAE did not answer that
question alone, but it answered

1082
01:29:14,560 --> 01:29:18,160
it earlier and more visibly than
most.

1083
01:29:18,960 --> 01:29:25,320
And in doing so, it helped
reshape the strategic horizon of

1084
01:29:25,320 --> 01:29:29,840
the entire region.
Sometimes a single small

1085
01:29:29,840 --> 01:29:34,680
country, by the example of its
choices, can change the

1086
01:29:34,680 --> 01:29:40,200
imagination of its neighbors.
If we step back now and look at

1087
01:29:40,200 --> 01:29:45,000
Norway and the UAE together, the
contrast is striking.

1088
01:29:45,600 --> 01:29:50,720
They arrived at similar outcomes
by very different paths.

1089
01:29:51,000 --> 01:29:56,600
Norway is a small parliamentary
democracy with a long tradition

1090
01:29:56,600 --> 01:30:01,960
of consensus politics, broad
social trust and powerful public

1091
01:30:01,960 --> 01:30:06,840
institutions.
The UAE is a federation of

1092
01:30:06,840 --> 01:30:11,840
monarchies in which most
political power rests with

1093
01:30:11,840 --> 01:30:16,240
ruling families and where the
native citizen population is

1094
01:30:16,240 --> 01:30:19,320
dwarfed by a larger expatriate
workforce.

1095
01:30:20,120 --> 01:30:23,960
Norway is cold, mountainous and
northern.

1096
01:30:24,680 --> 01:30:29,360
The UAE is hot, coastal and
Arab.

1097
01:30:30,240 --> 01:30:34,040
By almost any measure of
political form or cultural

1098
01:30:34,040 --> 01:30:38,640
style, the two countries could
not be more different.

1099
01:30:38,960 --> 01:30:43,880
And yet, when they discovered
enormous hydrocarbon wealth

1100
01:30:43,880 --> 01:30:48,760
within years of each other, both
did something unusual.

1101
01:30:49,400 --> 01:30:53,040
They resisted the gravity of the
resource curse.

1102
01:30:53,400 --> 01:30:56,360
Norway resisted through
restraint.

1103
01:30:57,040 --> 01:31:01,160
It established A sovereign
wealth fund, bound itself with a

1104
01:31:01,160 --> 01:31:06,760
fiscal rule, invested its oil
revenue abroad, kept its

1105
01:31:06,760 --> 01:31:12,000
existing industries strong, and
protected its institutions

1106
01:31:12,400 --> 01:31:17,440
through transparency.
The Norwegian model is one of

1107
01:31:17,640 --> 01:31:23,280
self binding.
It worked because Norwegians

1108
01:31:23,320 --> 01:31:27,760
broadly agreed to limit their
own ability to spend.

1109
01:31:28,240 --> 01:31:31,840
The UAE resisted through
diversification.

1110
01:31:32,160 --> 01:31:37,280
It used its oil revenue to build
airports, ports, free zones,

1111
01:31:37,280 --> 01:31:42,080
tourism, finance and global
investment platforms.

1112
01:31:43,040 --> 01:31:45,880
It established sovereign wealth
funds early.

1113
01:31:46,400 --> 01:31:49,720
It professionalized its
administrative state.

1114
01:31:50,440 --> 01:31:53,960
It planned openly for a future
beyond petroleum.

1115
01:31:54,840 --> 01:31:57,600
The Emirati model is one of
construction.

1116
01:31:58,240 --> 01:32:03,800
It worked because Emirati
leadership broadly agreed to

1117
01:32:03,800 --> 01:32:09,360
invest rather than to consume.
Both models share certain deeper

1118
01:32:09,360 --> 01:32:12,680
features.
Both took the Longview.

1119
01:32:13,360 --> 01:32:18,320
Both treated oil revenue as a
temporary opportunity rather

1120
01:32:18,320 --> 01:32:23,440
than a permanent entitlement.
Both invested heavily in human

1121
01:32:23,440 --> 01:32:28,400
capital, in education, in
skills, in capacity.

1122
01:32:29,320 --> 01:32:35,960
Both built institutions, whether
democratic or technocratic, that

1123
01:32:35,960 --> 01:32:39,720
could carry weight beyond a
single ruler or election.

1124
01:32:40,600 --> 01:32:45,600
Both avoided the temptation to
spend every windfall the moment

1125
01:32:45,600 --> 01:32:48,560
it arrived.
There are also serious

1126
01:32:48,560 --> 01:32:53,880
differences worth naming.
Honestly, Norway's wealth is

1127
01:32:53,880 --> 01:32:57,720
more evenly distributed among
its citizens.

1128
01:32:58,600 --> 01:33:02,680
The UA ES wealth, while broadly
available to its citizens,

1129
01:33:03,040 --> 01:33:07,680
depends on a foreign workforce
whose treatment has drawn

1130
01:33:07,680 --> 01:33:11,880
international concern.
Norway publishes detailed

1131
01:33:11,880 --> 01:33:16,720
accounts of its fund.
Emirati funds are more opaque.

1132
01:33:17,480 --> 01:33:21,280
Norway's political system
invites accountability through

1133
01:33:21,280 --> 01:33:26,720
elections, the UA ES through
long term planning and elite

1134
01:33:26,720 --> 01:33:31,040
consensus.
Neither model is without flaws,

1135
01:33:31,560 --> 01:33:35,200
and neither is the perfect
prescription for any other

1136
01:33:35,200 --> 01:33:38,240
country.
But both stand, in their own

1137
01:33:38,240 --> 01:33:43,480
ways, as proof that the resource
curse is not destiny.

1138
01:33:44,360 --> 01:33:48,600
Two countries with almost
nothing in common found their

1139
01:33:48,600 --> 01:33:53,360
own answers to the same
question, and the answers,

1140
01:33:53,600 --> 01:33:58,080
however different in form,
shared one essential trait.

1141
01:33:58,960 --> 01:34:04,640
Each treated its sudden wealth
as a responsibility rather than

1142
01:34:04,640 --> 01:34:09,320
a reward.
That, more than any single fund

1143
01:34:09,320 --> 01:34:13,960
or policy, may be the deepest
lesson of all.

1144
01:34:18,000 --> 01:34:22,320
We began with a question that
seemed almost paradoxical.

1145
01:34:23,120 --> 01:34:27,280
Why does the gift of natural
wealth so often wound the

1146
01:34:27,280 --> 01:34:32,440
countries that receive it?
Why does the richest ground so

1147
01:34:32,440 --> 01:34:37,640
often yield the poorest nations?
We followed that question

1148
01:34:37,840 --> 01:34:42,240
through the slow machinery of
Dutch disease, through the

1149
01:34:42,240 --> 01:34:47,560
swings of commodity prices,
through the strange erosion that

1150
01:34:47,560 --> 01:34:52,200
comes when a state lives off the
wellhead rather than off its

1151
01:34:52,200 --> 01:34:56,480
citizens.
We watched these forces work

1152
01:34:56,760 --> 01:35:02,120
together and apart, on one
country in particular, where

1153
01:35:02,120 --> 01:35:06,480
extraordinary oil reserves
coincided with one of the

1154
01:35:06,480 --> 01:35:10,000
steepest declines of the modern
era.

1155
01:35:10,360 --> 01:35:14,360
And then we travelled to two
very different places, far from

1156
01:35:14,360 --> 01:35:19,080
one another in almost every way,
and watched what countries do

1157
01:35:19,720 --> 01:35:24,000
when they refused to let the
gift become a wound.

1158
01:35:24,920 --> 01:35:29,720
We saw Norway pause before
spending, build a vast fund,

1159
01:35:30,200 --> 01:35:35,840
bind itself with a fiscal rule
and treat its wealth as a trust

1160
01:35:35,840 --> 01:35:40,760
for future generations.
We saw the UAE under Sheikh

1161
01:35:40,760 --> 01:35:45,560
Zayed and his successors use its
oil revenue to construct

1162
01:35:45,560 --> 01:35:51,040
airports, ports, sovereign
wealth funds and a diversified

1163
01:35:51,040 --> 01:35:56,240
economy, planning openly for the
day when the wells would no

1164
01:35:56,240 --> 01:36:00,120
longer matter.
We saw the rest of the Gulf

1165
01:36:00,560 --> 01:36:05,800
watching the Emirati example
begin to chart paths of its own.

1166
01:36:06,240 --> 01:36:10,520
What unites these stories is not
a single policy.

1167
01:36:11,000 --> 01:36:16,280
It is a posture, a way of
holding wealth carefully rather

1168
01:36:16,280 --> 01:36:20,920
than gripping it tightly.
A willingness to see oil as

1169
01:36:20,920 --> 01:36:24,760
something temporary, not as
something permanent.

1170
01:36:25,680 --> 01:36:30,600
A patience to invest in habits
and institutions that will

1171
01:36:30,600 --> 01:36:34,440
outlast any single well.
The resource curse, we have

1172
01:36:34,440 --> 01:36:37,240
learned tonight, is not a
verdict.

1173
01:36:37,880 --> 01:36:44,040
It is a tendency, a gravity, a
pull on the structure of a

1174
01:36:44,040 --> 01:36:48,440
country that bends it in certain
directions unless something

1175
01:36:48,440 --> 01:36:53,400
stronger resists.
The countries that succumb are

1176
01:36:53,400 --> 01:36:58,240
not cursed by nature.
The countries that escape are

1177
01:36:58,240 --> 01:37:01,200
not blessed beyond ordinary
merit.

1178
01:37:02,200 --> 01:37:08,240
The difference lies in what each
country does year after year

1179
01:37:08,560 --> 01:37:13,800
with the gift it has been given.
Outside the room, somewhere

1180
01:37:13,800 --> 01:37:18,720
across the world, oil is still
rising from beneath the sea bed.

1181
01:37:19,600 --> 01:37:23,040
Cargo ships are crossing the
Strait of Hormuz.

1182
01:37:23,800 --> 01:37:27,840
Sovereign wealth funds are
quietly buying shares in distant

1183
01:37:27,840 --> 01:37:33,440
companies, A pump Jack is
turning under a desert moon.

1184
01:37:34,160 --> 01:37:39,400
And in some country we have not
yet imagined, geologists are

1185
01:37:39,400 --> 01:37:43,280
about to find something that
will change everything.

1186
01:37:43,640 --> 01:37:48,480
What that country does next will
depend more than anything on

1187
01:37:48,480 --> 01:37:53,560
what it has already become.
For tonight, you do not need to

1188
01:37:53,560 --> 01:37:57,120
solve any of it.
You do not need to remember the

1189
01:37:57,120 --> 01:38:00,920
figures.
You do not need to keep track of

1190
01:38:00,920 --> 01:38:05,080
the names.
Let the names drift away like

1191
01:38:05,080 --> 01:38:08,640
soft lights.
Let the question settle.

1192
01:38:09,360 --> 01:38:11,960
The world will continue its
turning.

1193
01:38:12,720 --> 01:38:17,400
The Wells will continue their
pumping, and the cities of Glass

1194
01:38:17,400 --> 01:38:22,440
and the towns of Palm Franz will
continue their long, patient

1195
01:38:22,440 --> 01:38:28,640
negotiation with the future.
The world slows, and so do we.

1196
01:38:28,960 --> 01:38:29,720
Good night.