When the revolt broke out, Washington finally realised that the value of political stability in Mexico to their own interests exceeded the irritation factor coming from conflicts over oil and debt issues. The ability of the government to buy arms from the US was probably decisive in determining the outcome of the revolt. Washington’s perception that it needs, first of all, a stable Mexico has always re-emerged as a key theme in US-Mexican relations at moments of crisis. Meanwhile the failure of de la Huerta discouraged some of the other potential rebels and allowed Calles to take a harder line with the oil companies in 1925-1926. Meanwhile the early 1920s was a period of seemingly dramatic, although actually rather pointless, oil diplomacy both in Mexico and the rest of the world. The real story in Mexico was not apparent until later. It is one of declining production. The real action shifted to Venezuela, where profits were greater and political life less complex. Changes in Mexican taxation and conflicts over Article 27 of the Constitution played a limited part in inducing the companies to shift to Venezuela, but the most important consideration was geological. Mexican oil production started to fall sharply after 1921 and did not recover even partially until the mid-1930s. By the same token the belief of some Americans that the British had effectively taken over the world’s oil supplies soon proved unfounded, though for a time it generated quite a heated discussion in the United States. The British had in any case more or less accepted by 1919 that their leverage over Mexico and Mexican oil were both limited. George Philip London School of Economics Philip, George (1994), Political Economy of International Oil, Edinburgh (Edinburgh). x + 220~~. L35.00 hbk.
Oil is the lifeblood of the industrialised countries-they cover between 40 per cent (USA) and 56 per cent (Japan) of their energy needs from oil. The history and the current role of oil is closely intertwined with internal and international politics. This book provides an up-to-date, informed commentary on the role of oil in the major, developing producer countries in the 20th century. It traces the discovery of oil, the structure of the industry, the logic of oil markets (highlighting in particular refining and transportation) and the interconnection between the oil industry and the political life. At first, we view the emergence of the oil industry in underdeveloped countries under the influence of colonial imperialism (in particular British), the coming into being of a relatively stable industry structure consisting of the major international (mainly US and UK) oil companies. The book moves on to the reaction by economic nationalism-with a particular focus on Mexico, Venezuela and Iran. The deal struck between governments (acting for hoststate elites) and the oil companies is continuously renegotiated, with an emphasis on much greater tax takes by the host-states and in the end the nationalisation of the 1970s (preceded by the particular Mexican nationalisation in 1938). The narrative of the world oil history concludes with the current re-entry of oil companies under the very cautious moves towards some privatisation. Important current themes-environment, the collapse of Communism and the far from clear opening up of the former Soviet oil industry-are consciously left out. So far, the book paraphrases a narrative already presented in earlier and sometimes more comprehensive works (in particular by Anthony Sampson and Daniel Yergin). The interesting part of this book consists in two orientations. First, the book’s focus is in the main on the political/economic impact of oil development on the underdeveloped host states; second, the book comments critically, and with the advantage of hindsight and current knowledge and analysis, on many key assumptions held in developing countries and by Third World advocates on the beneficial effect of nationalisation and the large-scale renegotiation of the tax bargain with the international oil companies. It is, therefore, one more melody in the Requiem for the ‘New International Economic Order’ (see my essay on this theme in New Issues in Znternational Law, N. El Nauimi (ed.), 1995). The main conclusion of the StudyAeveloped in individual case studies (mainly Mexico, Venezuela and Iran), but also some other references (Saudi Arabia, Indonesia, Nigeria, Algeria and the Gulf sheikdoms)-is that the unexpected and subsequently volatile flood of oil money brought about by the renegotiation of the tax deal with the oil companies, and the resultant
explosion of oil prices in 1973 and 1979, did as a rule not generate any significant economic benefit. Rather, the more oil money a country obtained, the more its economy, its society and its political system deteriorated. Oil money squeezed out other productive activities, it tended to raise the foreign exchange value of the country’s domestic currency (Dutch disease), it created all the aspects of a spoilt society and economy dependent on political favours, rather than on economic performance--characteristics that are well-known throughout the Third World oil producers. Oil money did not even contribute significantly to domestic or external securityrather, it led to a spiral of demands for unproductive consumption at home, to greater dissatisfaction with the political system, and, in the case of small, but rich oil producers (mainly the Gulf States) to external threats by covetous and stronger neighbours. Philip’s book is largely a comment on Adam Smith’s view of the inefficient and unproductive nature of societies dominated by easy revenue rather than competitive economic performance-the story of the spoilt children of suddenly rich parents. He contrasts the amazing growth of oil income with the equally amazing deterioration of the economy in countries like Nigeria and the inability of virtually all Third World oil producers to invest the oil money productively in an industry not based on oil. Corruption in Nigeria, the world leader in this field, the exacerbation of internal political tension in Iran, that led to the fall of the Shah; the stagnation of political, economic and cultural development in the Arab oil states; and the dissatisfaction of the Venezuelan people with a very high level of State-subsidised welfare: all these are-in my view, rightly-laid at the door of excessive oil income. Philip concludes, based on his analysis of the impact of oil income, that the role of money/capital in economic development has been highly over-rated. One gets the impression that the oil price and host state tax-take increases were in a way paid with Monopoly money, moving around the countries and the world and causing havoc in most cases, without generating any real benefit-xcept for the rich and powerful who got richer. The result is a rather gloomy perspective. He seems to conclude that while oil money begets no permanent wealth, nor stability, security or development, it is a necessary part of the oil game whereby the industrialised states have to humour the fact that the oil they badly need is concentrated in a few unappetising parts of the world, which otherwise would merit no further attention. This outcome is well illustrated by his analysis, but it is somewhat short of what I would have liked to see. Are there only stories of failure? Or are they also stories of success? (Indonesia is vaguely hinted as a case where oil money has caused less harm than elsewhere). Does it make sense to focus only on the underdeveloped producers, or should one not have looked as well at industrialised producers-the UK and Norway in particular-to find out if there is a way to use oil money effectively and realistically to some benefit? What are the policy conclusions? The author offers no lesson whatsoever as to what is to be done about oil income. The conclusion a reader could draw is that it is best to have no oil, and if there is oil, to develop it slowly and reluctantly, and minimise tax income rather than maximise it. A comparative look at other commodities and commodity history might have deepened and enriched this, which in many ways, is very limited in focus. Do we not have a similar story of the commodity-endowment curse in the histories of copper, guano, gold, silver, cocoa, coffee, cotton and so on? Is it right to equal commodity development with development damage-a short period of fabulous riches spent on consumption followed by an economic and social ghost-town? Similarly-but this is perhaps asking too much for a book written in the context of a well-established Anglo-Saxon university-it would have been of interest to compare this analysis with often quite similar results achieved by studies from developing countries (e.g. Norman Girvan) or Continental Europe (e.g. Elsenhans or the extended French discussion) on the role of statist bureaucratic elites in rentier states, appropriating the fruits of foreign development from their national resources. But then, language divides the world into often very narrow research communities that are ignorant of each other. The book, in spite of such limitations, is a most useful commentary on the most neglected part of the history of oil, its battles and negotiations: the fate of the oil income and the little benefit it seems to have generated for the societies (as contrasted with their rulers) in which it is developed. A timely and useful lesson on the greater role of culture and institutional strength and the lesser role of money in economic development. Thomas W. Waelde University of Dundee