I am just a little ashamed to say that while a great number of news reporters and American citizens are crying loudly about the outrageous price of gas, I'm actually celebrating. It's not because I'm gloating as one of the ~5% of the population that does not drive an SUV. Instead, I'm happy because I know that the high price of oil is the one challenge that will finally drive the innovation and improvement that will free us from costly fossil fuels. (For previous posts see here, and here)
Unfortunately, there is near term pain. Of course we're paying more at the pump; but Thomas Friedman in the New York Times recently reminded us that the world's people feel pain when dictators with oil fields tighten their grip. In 2007, the Freedom House, which tracks democratic trends and elections around the globe reported "the worst year for freedom in the world since the end of the cold war," as 38 countries declined in freedom while only 10 improved. It also means that our democratically-elected President Bush must bow down to a tyrant to try fail to lower oil prices and help our economy. Friedman calls it "The Democratic Recession."
"There are 23 countries in the world that derive at least 60% of their exports from oil and gas and not a single one is a real democracy." - Larry Diamond, Stanford
I first read this concept in the book The Paradox of Plenty by Terry Lynn Karl in 1998. Her research showed a wide variety of historical examples of how too much easy money from natural resources have not only enabled firm control by dictators and monarchs, but also limited the development of vibrant, diverse economies. The counter-point to the Challenge Dividend comes into play: lack of challenge leads to failure; and its been the case from the Spaniards taking gold from Mexico to Chavez taking Venezuela back in time forty years.
The good news, I believe, is that just as higher prices at the pump mean pain for us now, it is creating a powerful incentive for advancement in energy alternatives. Ultimately, these dictatorships will fall and we will no longer have reason to station troops in Iraq or cozy up to the Russian kleptocracy. I just hope it happens in my lifetime.
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