How does resource availability affect governance incentives? This paper from the World Institute for Development Economics Research studies political and governance systems contributing to fragility in resource-rich states such as Iraq and resource-poor areas such as Somalia. In an ethnically divided or tribal society, a consociational democratic state will arise if resources are larger than a threshold value; the level of resources available influences groups’ desire to establish a central state authority. A consociational political system following war can strengthen rather than weaken rent-seeking coalitions.
Iraq and Somalia are examples of two different types of fragile states. Some states, like Iraq, are potentially rich, but fragile. In others, like Somalia, fragility is a complex outcome of conflict and poverty. However, they have state failure in common, plus governance structures that perpetuate civil conflicts, causing post-conflict reconstruction to fail.
In Iraq, fragility is related to the form of government established by potentially conflictive groups in a resource-rich economy. Somalia fits more readily within traditional concepts of a fragile state. It is a stateless society, where tribalism, ethnic conflict and poverty have led to state failure.
In Iraq, a consociational democracy has been established. This is a system to mediate the demands of different ethnic and religious communities for resources and political power. However, governance structures have failed to produce stable political systems to distribute resources, causing intense conflict. A certain resource threshold is needed for a successful consociational system. In Somalia, this resource threshold is beyond reach. Lack of resources means there is no incentive for power-sharing.
In resource-rich countries such as Iraq, economic growth and development can be hindered by rent-seeking coalitions which seek special favours. War, followed by a consociational political system, can strengthen such coalitions, particularly in societies with ethnic and religious divisions. In Iraq, this fuels the insurgency, which perceives the consociational system as attempts by other ethnic groups to control resources. Findings include the following:
- The relationship between democracy and economic development depends on institutions that prevent rent-seeking or violent behaviour by individuals or groups.
- Iraq’s abundant resources offer high potential productivity in combining resources and government, but destabilising forces generated by ethnic rivalry over control of resources are threatening to break Iraq apart.
- In Somalia, there are insufficient material incentives for different groups to resurrect a central authority. Resources are mainly agricultural and potentially powerful groups already have access to these. Combining resources and government would result in low productivity and weak redistribution potential.
To transcend Iraq’s current divisions, a national economic development plan, designed and implemented by a secular central government, is needed. The establishment of an all-encompassing democracy would eliminate the inefficiencies and growth-impeding politics of interest groups. Other implications are that:
- The establishment of a developmental state is essential for Iraq’s economic progress. Secular national politics are also vital.
- Integrating Iraq with the international economy requires strong central government. This must counteract forces unleashed by economic exchange systems established between ethnic groups and the global economy, through state oil resources and foreign reconstruction funds.
- In Somalia, although anarchy seems to work, it is an unstable system. Recent events demonstrate this, from the Islamic Courts’ attempts to extend their authority in 2006, to the 2007 Ethiopian military intervention.
- Establishing an all-encompassing democracy could also be a solution for Somalia.
