Thinking out loud: ”is free money a blessing or a curse?”

Think of oil-producing countries. These are nations that have done nothing to create their main source of wealth: crude oil that is sitting underground within established borders. These nations are basically a group of people who at some point in history learned they happened to be occupying a geographical location that for some reason contains crude oil, which is basically “free energy”. Realizing the incredible value of this natural resource that not every nation has, they learned they can extract this oil and sell to other countries for a nice return. It’s like getting free money.
Think about it: if they didn’t know the value of “black gold”, they wouldn’t go through the trouble of searching and drilling the ground to extract it. They’d live their lives and build their societies in a completely different way. Becoming aware of the value of oil for the world and realizing they were sitting on top of a lot of oil, is analogous to an ordinary individual who inherits or wins a large sum of money. The question is, is it beneficial for a nation to be the “owner” of this oil? Is it good to win this inheritance? The easy answer is “yes”. But is this oil ultimately a blessing or a curse?

An analysis of most oil-producing nations (if not all) shows that these nations are essentially lazy. A good example for this discussion is Venezuela. Venezuela has had a large influx of money due to their large reserves of oil, which they have been extracting and exporting. This oil has provided that country with considerable wealth (although they are by all accounts still a poor country), and it’s likely they’ll get richer in the future. However, Venezuela is completely dependent on exporting oil for income. If they had no more oil to sell today, they’d be in big trouble economically as they have no other real industries to provide them with income. The same is true of many oil-producing countries in the Middle East: if they have an economy that is completely dependent on exporting oil, without oil their economies would collapse.

Well, we can be sure of one thing: assuming humanity isn’t destroyed by nuclear war, global warming, or some other way, the day will come when these nations will run out of oil and be unable to export it. One problem they are already facing is that the wealth they’ve enjoyed from oil profits has allowed their own population to increase internal oil consumption; thus leaving them with less oil to export.

For these oil-producing nations to survive they will have to create new and sustainable industries that can provide them with income when they can no longer rely on exporting oil. Many Arab nations (the most progressive ones) seem to understand this issue, and it appears they have been trying to acquire American companies in high-tech and other industries, in an effort to diversify their investments and “create new industries”.

Seattle Pi