Op-Ed: Are resource revenues a good thing for a nation?

Many nations around the world exploit their natural resources to receive astronomical amounts of revenue. But what happens to government when they run out of it?

When countries have a vast amount of a certain resource they tend to export it, create an immense sum of wealth and provide more government services to its own citizens. Yet the country does not ask the question: What happens if we run out of this precious product? That is what is happening to some of the top oil producers in the world. Russia has become second of the oil and natural gas suppliers on Earth and, therefore, they are exercising that wealth through military means and world power without asking that simple question: What if we run out of oil? In the first quarter of 2008 the Russian Government had proclaimed they were in a 534.94 billion roubles surplus ($23.4 billion), according to Energy Information Agency, and therefore spending has increased 19%. Already oil production has decreased in Russia by 1.3 per cent in March and, according to Natural Resources Minister Yuri Turtnev, will continue to drop throughout 2008. What happens when those revenues lower each quarter? Governments create deficits, the national debt rises and eventually the currency debases and devalues because that nation must borrow from another country or go to its central bank to print money in order to sustain those programs that the government initially created because of its short-term revenues. “Most bad government have grown out of too much government.” Thomas Jefferson said this quote while he was President of the United States of America and that quote could not be more significant and truer than today. This is part of the problem, when a country has a wealthy resource; they create more government and make its own people become dependent on the Big Brother and less dependent on those who are truly responsible for their own lives. Revenues of a unit are also dangerous to a country’s national security. As the case in Russia, and other resource revenue nations, a country builds their own military power. Once that has succeeded, the nation starts to become an interventionist and is then resented by those who have been invaded, not just militarily but also internally. Internal revenues are a terrific aspect to the foundations of a great country, as long as the government stays within its means, however; building revenues through external capital is dangerous economically and socially. The United States used to be a producing, saving and exporting nation and for that reason had an astronomical amount of funds. Also up until around the 1980s, under the Reagan administrations, used to be one of the largest creditor nations but now since the U.S. is not producing and saving it has become the largest debtor nation (borrowing $2 billion per day from China, Japan and Saudi Arabia).