Karl, T. (2007) ‘Ensuring Fairness: The Case for a Transparent Fiscal Social Contract’

Precept 2 states that successful natural resource management requires government accountability to an informed public. In turn, an informed public requires greater transparency in the natural resource sector. The chapter by Karl provides support for the importance of transparency as a first step in overcoming the resource curse.

Karl begins with the premise that the resource curse is essentially a political not an economic problem, therefore also requiring a political solution. Addressing this problem requires a ‘big push’ with the objective of establishing a ‘fiscal social contract’ between state and society through transparency. Without an incentive to impose direct taxation, oil-states are not required to enter into a revenue bargain with their citizens and therefore face reduced pressure for accountability and transparency. The author identifies three types of ‘stateness’ deficits, which remove any form of fiscal accountability:

     - Information deficit as a result of an absent tax bureaucracy and the general opacity of the industry.

     - Monitoring deficit originating from not having a revenue incentive to comply with or develop regulations for economic producers.

     - Participation deficit particularly due to a lack of connection between state and its subjects.

Sequence is highly important in combating the resource curse. Addressing the information deficit through improved transparency is a first step, which sets the framework for improved monitoring, whilst both monitoring and information create incentives for the participation of those adversely affected by petroleum exploitation (p. 278).

Access the article here.

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