On May 30, cultural historian Alexander Etkind gave a public lecture on the concept of the super-extractive state.
Professor Etkind began by saying that at the present moment there is a growing interest in political economy. History, having survived its predicted endpoint, is experiencing a return. This is, however, within the framework of an altogether different capitalism—not the one spoken about by classics. They did not know the significance that natural resources and raw materials could acquire.
If we look at both the Russian and international market, the total value of the organizations involved in processing raw materials approaches the value of those in the financial sector. The ghost of Marx would be surprised and amazed to learn about the role of natural resources in the high-tech world. For him as well as for Adam Smith, the significance of raw materials wasn’t known since at the time they were supplied by distant colonies.
To a similar question, the economist Thomas Piketty would answer that all shares, whether related to the financial sector or raw materials, are equally liquid and therefore there is no difference between them. However, this is all different from the standpoint of political economy.
The idea of the “resource curse” is sufficiently well known, also falling under the title “Dutch disease.” The latter refers to the process begun after resource deposits were discovered in the Netherlands. The practice of monetary sterilization from resource dependence is linked to this idea. In the 21st century there is further development of resource dependence, which leads to de-modernization. An example of this is Russia, with its weak property rights and other “bad” institutions. The Dutch disease can be renamed the Russian disease, which, despite its name, exists in many parts of the world. This is why it can be examined from the point of view of transnational history, and the problems of de-modernization due to resource wealth globally studied. Alexander Etkind is currently writing a book on to this topic.
What problems does resource wealth cause? Daron Acemoglu and James Robinson attempt to examine these problems in the context of institutional economics in their book Why Nations Fail, where they make a distinction between extractive and inclusive states.
In states of the first type, the apparatus of coercion does not allow ordinary people to enter into the elite; such was the case, for example, of the 19th century Russian economy with the institution of serfdom. In such a state the elite are predatory and not always effective, although such a system does ensure full employment. In inclusive states there is no social hierarchy. There is, rather, a meritocracy, where people join the elite through their abilities and successes. However, to what extent does this work in reality? According to Etkind, more than half of Cambridge students come from private schools, where only 8% of the population is taught. Making education fully inclusive does not work. It is believed that only inclusive states are capable of ensuring long-term economic growth. Crises are linked to the realities of extractive states. According to Etkind, Acemoglu and Robinson mix the two subsets of extractive states. These are agrarian (with full employment) and the opposite—super-extractive—based on natural resources.
Suppose that a natural resource exists that can be mined only one place on Earth—on the territory of a particular state. The labor theory of value doesn’t work, since the value of this resource depends not on the labor spent on extraction, but on the foreign market and the amount of resource itself. In such a case the state has no motive to develop public institutions, as its income does not depend on the population and the population’s earnings. The state depends only on how revenues from the resource are redistributed. It faces many enemies ready to encroach on the resource and the costs of maintaining security. In such a state, economic growth does not occur thanks to knowledge.
In such a system, the elite exploit resources without the participation of the population. In Russia only 2% of people are involved in mining and transporting oil and gas, but they provide 2/3 of the national budget. This creates a huge social imbalance. In Moscow, according to estimates, an oil industry worker can save up for an apartment in five years, while a nurse takes fifty.
Another group of citizens in this model, constituting 4% of Russia’s population, provides security to natural resources and the country’s elite. The state, being dependent on this group, has incorporated it within itself. On top of this, there is a bureaucratic system of redistribution that reserves a share of the production and sale of natural resources for itself.
If we look at a neighboring inclusive state without resources, we see that the country’s wealth is generated by citizens and their labor. Under these conditions the budget is primarily supplemented by taxes, and thus the state is interested in the welfare of its citizens. In super-extractive states, citizens are superfluous. Thus they employ a system of direct income rather than taxation. Taxpayers cannot control the government. A state mining field requires little labor, so forms of protest, such as strikes, do not work. The country’s wealth does not depend on the welfare or health of the population since the government grants people subsidies, which it aims to reduce by all means.
Thus a special institution of biopolitics is formed, where the population decreases not because of systematic extermination, but simply because it is unnecessary. The more that a country relies on natural resources, the less it needs human capital. Thus, the differences between types of raw materials in a country’s territory may determine the political characteristics of countries. Here we can apply Bruno Latour’s theoretical framework.
The first example is Russia. The furs and tar of the pre-Petrine period differed significantly from the production of grain in the Russian empire. In the first case, the main task was transportation. In the second, it was intensity of labor.
The second example, shown in the works of Timothy Mitchell, is the consequence of transitioning from coal to oil as the main energy source. Coal is relatively evenly distributed over the earth’s surface, and coal deposits were always relatively close to population clusters. Its extraction was linked with worker solidarity, and as a result strikes could paralyze whole economies. This was important to the Marxist idea of the proletariat. In contrast, oil and gas are both removed from population centers and also require a smaller number of experts. These experts are scattered, making strikes nearly impossible.
In a coal economy, the main thing is extraction. In oil and gas economies, it is transportation. Tankers and pipelines are vulnerable to enemies (called pirates on the sea, or terrorists on dry land), and thus security guards have become central figures. According to Etkind, Ukraine and Poland are good objects of comparison with Russia. They are not resource rich, but are dependent on coal, being the largest producers and exporters in Eastern Europe.
In discussing labor and capital, it is impossible to ignore knowledge. Hydrocarbon production requires sophisticated knowledge and technology. This existed in the Soviet Union, but to a much lesser degree in post-Soviet Russia. This is related to ideological rather than economic reasons. The USSR invested in science and education so as not to depend on western countries. Now the position is different, and the combined effect of ideology and political economy has become the cause of the degradation of Russian science and education.
The distinction between resource-dependent and labor-dependent states can be represented as a game played by two participants, in which one (the resource-dependent state) sells, and the other (labor-dependent) buys resources. The latter worries about the progress and development of public goods; the former can mimic this, but is generally inclined to oppress its population. The elite of the first state don’t trust it to store their wealth, so they keep funds in the labor-dependent state where their families live and resolve conflicts. In a paradoxical way, the elite of the resource-dependent state support public welfare and institutions in the other state.
Equilibrium exists in this game as long as peace and trade between the two countries continues. Resource prices may rise, but the labor-dependent state gets its money back due to the recoil of the other country’s elite, which leads to a winning exchange for both countries. What can destroy this balance? First, the gradual depletion of natural resources. Prices can become so high that the labor-dependent state comes up with replacements, as has evidently happened with oil shale and gas. Second are internal mechanisms. Philip Chapkovsky suggests that the outflow of capital from resource-dependent countries cannot be regulated—the sovereign cannot control itself. The result is a series of crises that establish a new balance.
We can expand this situation by including a third player—a country in which there are neither resources nor labor (i.e. Ukraine). Two players compete for the third state, trying to turn it into their copy. Competition for colonization and containment leads to conflict between the two players. It is possible that social researchers will soon have enough data for such an analysis.
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A commentary and Q&A session followed the report. The first of comment, generalized by rector Oleg Kharkhordin, concerned the question of which countries fall within the framework of the theory of super-extractive states. According to Etkind, this is most of the world, including states of the Arab East, Nigeria, and Brazil. Bahrain and Qatar are specific cases where the division of the population into citizens and bonded laborers without civil rights exists.
Nikita Lomagin, director of the ENERPO program, delivered a detailed critical commentary. In his opinion, greater involvement of labor resources can be observed in the contemporary Russian economy, associated with the depletion of past reserves of natural resources. Development of the Arctic shelf is one of the large-scale examples that require an increasing number of highly qualified personnel. Moreover, as noted by the commentator, under the conditions of a globally competitive environment, not all is as it was in the Middle Ages —competitive pressures and global organizations exist. Although statistics are incomplete in this regard, since 2002 Russia has experienced a twofold increase in research and development. Large stocks of difficult-to-obtain oil require new technologies, new engineers, new legislation and, accordingly, a number of trained lawyers. We should not ignore the political ambitions, that, along with the idea of “Great Russia,” require specific development—a growing population, skilled army, and so on. In general, the problem is more complex than it seems and requires serious empirical research.
Alexei Knorre
