Why talk about “resource-dependent nations”? Because the way a country earns its money shapes the way its society behaves. Conventional states—those funded primarily by taxes—operate on a reciprocal bargain between government and citizen: taxes in exchange for public goods, accountability, and representation. This simple relationship has quietly shaped everything from ancient empires to modern democracies.
But resource-dependent nations break this script entirely. When governments earn their revenue not from the people, but from selling oil, gas, or minerals abroad, the traditional social contract dissolves.
In taxation-based states, a mutual dependency emerges:
- Citizens: “I pay taxes, so I demand transparency and accountability.”
- Government: “We need your taxes to function, so we must earn your trust.”
But in resource-based economies, wealth flows from the ground—not from the people. This gives governments unusual independence from their populations:
- Citizens receive free education, healthcare, utilities, and public-sector employment.
- Governments trade material comfort for political quiet.
Saudi Arabia is a prime example. For decades, oil revenue allowed it to offer generous public services without demanding much in return from its citizens. Yet this very stability hides fragility: when oil prices fall or global demand shifts, the entire model is exposed. Tax-based economies adapt by diversifying; resource-dependent ones remain shackled to a single volatile commodity.
From Hobbes’ Leviathan to the Resource-State Paradox
In the 17th century, Thomas Hobbes argued in Leviathan that people surrender some freedoms to a sovereign in exchange for order—the earliest articulation of a “social contract.” Taxation-based states embody this logic: citizens pay taxes, and the government earns legitimacy by providing services.
But in resource-rich nations, this logic reverses. Governments bypass taxation altogether, selling natural resources to foreign buyers and using the revenue to maintain domestic calm. Subsidies, salary guarantees, and welfare benefits become tools of political stabilization. Citizens, rewarded with comfort, have little incentive to demand accountability or democratic reform.
Wealth becomes a sedative. The state becomes a benevolent provider. Dissent becomes unnecessary—and often undesirable. The political contract shifts from representation to redistribution.
The Dutch Disease: When Blessings Become a Curse
Oil rigs symbolize both state power and structural vulnerability.
The classic term for this phenomenon is “Dutch Disease,” coined after the Netherlands discovered natural gas in the 1960s. The influx of revenue strengthened the Dutch guilder, making Dutch manufacturing exports expensive and uncompetitive. Entire sectors shrank while the economy grew dangerously dependent on a single resource.
This pattern repeats across resource-dependent nations:
- Currency appreciation: Resource exports inflate the national currency.
- Industry decline: Agriculture and manufacturing collapse under the pressure of higher exchange rates.
- Resource addiction: Economies double down on the “easy” money.
- System collapse: When prices crash, diversification is too little, too late.
In future installments of this series, we’ll explore why Norway avoided this trap through a sovereign wealth fund—while others like Venezuela descended into collapse.
Some Clarifications
Modern political science often uses the term “rentier state” to describe nations that rely heavily on resource rents rather than taxation. This definition differs from Lenin’s early-20th-century use, which described colonial-era financial capitalism.
In our context, a rentier or resource-dependent nation is one where the government profits primarily from selling finite natural resources—oil, gas, or minerals—rather than collecting taxes from its citizens.
Think Saudi Arabia (oil), Qatar (gas), or Nauru (phosphate). Their governments earn revenue by exporting natural wealth, not by building a diversified domestic tax base. To avoid confusion with older terminology, this series uses the phrase “resource-dependent nation”—a clearer, more accurate term for the economies built on wells, rigs, and mines.