Why Nations Fail, does this apply to Texas?

Why Nations Fail is a fascinating book, by Acemoglu of MIT and political scientist, James Robinson. They posit that economies that have abundant natural resources can be easily captured by groups that become politically powerful. The authors view is that an abundance of natural resources, which may seem like a blessing, often turns out to be a blessing for a select few and, for the rest of a country’s citizens, a curse. It’s called the natural-resource curse.

east-texas-oil-field[1]The natural-resource curse is well understood economic equation, there are a number of papers on it, this one by Sachs and Warner, the show that countries with great natural resource wealth tend nevertheless to grow more slowly than resource-poor countries. Resource-abundant countries tended to be high-price economies and, benefited by the few.

With the media here in Texas, and especially Austin, currently focused, on prices, the tax burden; the impact of the thousands of people moving  Texas;  and John Stewart Daily lampooning Texas, from inside Austin itself; and an increasing sense of conflict among ordinary people, I wonder if Texas, through it’s natural abundance of land, oil, shale oil isn’t in fact setting itself up to fail?

Certainly ahead of next weeks mid-term elections, the 10/1 Austin City Council election, the vote on Prop-1. all the signs are there. While the abundance of natural-resources has lulled people into a false sense of security, allowing various groups to drive conflict in order to gain control of the State Institutions. Classic theory in practice.

While this would normally be something you’d expect in 3rd world countries such as Sierra Leone, Angola, Venezuela and Nigeria, is it so impossible that it could happen here?

The signs are that it is. Texas is increasingly dropping in national ranking, and internationally worse still. Despite the abundant wealth garnered from the Oil boom, and the more recent Gas/Shale boom, the bulk of that money resides indeed in the hands of the few. Texas has

Oxfam has a solution paper to the natural-resource curse. It starts by saying “get your hands on the money”. In this case, I think rather than get our hands on the money, it would be better to follow Norways lead and create a world leading Sovereign Wealth fund and use that to improve the State, and services that Texas itself has. What are we currently doing?  Raiding the rainy day fund to improve the roads, the rainy day fund aka The Economic Stabilization Fund, or the Texas version of a sovereign Wealth Fund, nice.