Nature's Evil [calibre 5.27.0]

Addictive monopolies lead to inequality. Sustaining these levels of inequality is more difficult for petrostates with a large population, such as Russia, Nigeria, Indonesia, Venezuela and, until recently, Mexico. Again, Russia is typicaclass="underline" according to the statistics for 2018, the 1 per cent of the population who are employed in oil and gas extraction provided about half of the state budget, though the actual numbers are even higher. Income from oil is enormous, but it is not enough for the twin tasks of meeting the demands of the elite and supporting the population. The aim of authoritarian regimes is to balance these tasks, which is easy during a time of growth and difficult in a slump. Dependency on oil is often compared with addiction, making an analogy between a sluggish economy which causes millions to suffer and an individual pathology. In 2006, President George W. Bush said: ‘America is addicted to oil.’ In Russia, critics talk of the ‘oil needle’ on which the country is mainlining. The governments of post-Soviet Russia have repeatedly announced programmes for diversification and modernisation. But this large country with weak democratic traditions has found it impossible to self-medicate.

In the petrostate, men and women depend not on their labour but on the charity dispensed by the elite. Both sides rely on external forces, and they bargain not among themselves but with someone else. God, nature, chance, or some other power arranged things so that oil is connected with religion. The Islamic countries own 62 per cent of the world’s oil reserves and export more than half of global oil. Another 5 per cent of reserves belong to countries with an Orthodox Christian population. 26 There is also a link with ideology: a quarter of extracted oil is concentrated in three post-socialist countries – Russia, Venezuela and Kazakhstan. Only a religious or nationalist language can explain the fateful chance that endowed some countries with an abundance of resources and gave none at all to others. Unable to understand the source of their blessing but feeling that they are exceptional, the oil-rich elites have reworked the ideology of the chosen people, combining mysticism and nationalism, arrogance and cupidity. Resource nationalism helps an elite to distinguish between its own people who receive the state’s charity and aliens who must not receive it. For the elite, their charity confirms their self-awareness as chosen people. For the population, it turns citizens into paupers and migrants into nonentities. This is a vicious circle of evil.

The oil standard

Defying the long-term trend, the price of oil and almost all other natural resources significantly increased at the start of this century. When these prices peaked in 2014, the total value of shares included in the energy sector on the New York Stock Exchange (nearly $2 trillion) approached the total value of shares in the financial sector (just over $2 trillion). Since then much has changed, but the world still obtains almost all its energy by burning fuel and polluting the atmosphere. Lying in the ground like assets in the bank, fossil carbon defines the value of national currencies and the size of state budgets. Petrodollars, gas roubles, coal zloties and other carbon currencies circulate in the global market, setting prices of labour, education, health care and life itself. The price of a barrel of oil is the main index of the world economy – a more important indicator than the price of gold, which obediently tracks the price of oil. The gold standard was abolished decades ago – perhaps it would make sense nowadays to talk about the ‘oil standard’?

As Karl Polanyi showed, the gold standard was a key to the fabled stability of Europe in the nineteenth century. ‘Where Ricardo and Marx were at one, the nineteenth century knew not doubt,’ he wrote. 27 But Germany abandoned the gold standard during the First World War, and Great Britain and the USA left it during the Great Depression. In 1944, the Bretton Woods Agreement established fixed exchange rates between the dollar and the other currencies of the allied nations. Marketed almost completely in dollars, oil had already become the most important commodity in international trade. The dollar would remain fixed to gold, but the price of oil – the exchange rate of a barrel of oil against an ounce of gold – was floating. The USSR was a signatory to this agreement; the preservation of the gold standard was advantageous for a state that extracted gold and oil. The Bretton Woods Agreement had been worked out in discussion between the British representative, John Maynard Keynes, and a senior US Treasury official, Harry Dexter White, who, it emerged later, was a Soviet agent. Together, they proposed to create, along with the World Bank and the International Monetary Fund, a third global organisation which would answer for the world supply of strategic resources – oil, rubber, metals, etc. This interstate corporation would have stored raw materials in depots, smoothing price hikes and supplying raw materials according to national quotas. Clearly, this system would be beneficial for the resource producers – this project was like something dreamt up by the Soviet State Planning Committee. However, even the founders of the neoliberal movement approved of it. Friedrich Hayek, for one, proposed changing the gold standard to an ‘international commodity reserve currency’. 28 National currencies would have been pegged to a basket of ‘standard storable raw materials’, including petroleum. Sketches of a similar index have been preserved in Keynes’s papers. 29 When Keynes and Hayek were at one, the twentieth century ‘knew not doubt’. In August 1944, the USA and Great Britain agreed to found an international oil council – an early, broad and more powerful version of OPEC. Judging by the proactive position taken by White, his Soviet masters were also keen on this project.