Cash Transfers and the Resource Curse

Nathan Jensen blogs:  The Center for Global Development has a series of proposals on using cash transfers to mitigate the natural resource curse... This is a really interesting idea, but I have a few concerns:

• ... It isn't clear to me how cash transfers would change the incentives to rebel or for leaders hold onto power...
• ... As long as natural resource producers can borrow against resource wealth, this can provide a steady stream of rents to the government...
• ... One reason for governments (or MNCs) to control resources is that they mitigating the adverse effects of price volatility...
• ... A strong assumption is that by allocating resources and then taxing them, citizens will demand more from the government...There is some good work on the “fiscal illusion” where citizens are especially bad at linking the costs of government spending to their own tax bills. 

... Would giving citizens a direct financial stake in natural resource contracts increase their incentives to support expropriations or contract renegotiations with natural resource extraction firms?  ...

Read the full post here