Argument: Long term benefits

It is very tempting to recklessly use an unexpected windfall of money immediately. But the best thing to do is to invest for the long term either to build infrastructure that will pay back its cost in future economic growth, or to invest it in funds that will continue paying dividends long into the future. The example of how Britain and Norway spent their North Sea oil revenues is very revealing: “the British governments spent their North Sea winnings on cutting national borrowing and keeping down taxes. Whatever came in went straight into the day-to-day budget. By contrast, for the past 16 years Norway has squirreled away the government's petroleum revenue in a national oil fund”(1) which now has $810 billion in assets, almost twice the country’s GDP, providing 5% returns.(2)

The advantage of such investment is that they will continue to bring income even after the oil is gone. The oil will therefore benefit future generations as well as the current one. A panel of experts which are immune to political influence is the most likely body to think about long-term needs of the country and devise a plan which can ultimately bring income for a long period of time.

(1) Simon Gompertz “Has the UK squandered its North Sea riches?” , BBC News , 8 October 2012 http://www.bbc.co.uk/news/business-19871411

(2) Jonas Bergman, “World’s Biggest Wealth Fund Says Record Size Is Posing Hurdles”, Bloomberg, 1 November 2013, http://www.bloomberg.com/news/2013-11-01/world-s-biggest-wealth-fund-says-record-size-is-posing-hurdles.html

Candidate 1: "Having oil does not just provide the money to undermine, or prevent democracy taking hold; it also provides an immense source for corruption. Oil revenues provide a revenue stream that is not dependent on the people but simply upon the global market and oil production. In a country with no checks and balances, accountability or transparency the money will inevitably go to the elite. This is how Equatorial Guinea can be rich while having most of the population in poverty. Dictator Obiang himself is worth an estimated $700million or the equivalent of about 4% of GDP.(1)

A trust fund can ensure that money from oil goes to the poorest not the richest. It is managed outside the country and away from political pressure. If the government is corrupt and uses the national budget to its own ends the trust fund can provide the dividends as investment in individual development projects to ensure the money is used where it is most needed. All the time it can be transparent to show when and where the government is trying to influence it or get backhanders.

(1) ‘The Richest World Leaders Are Even Richer Than You Thought’, Huffington Post, 29 November 2013, http://www.huffingtonpost.com/2013/11/29/richest-world-leaders_n_4178514.html?utm_hp_ref=tw"
Candidate 2: "Not all politicians are incapable of investing for the long term. After the economic crisis in which the world saw the perils of “living in the moment”, politicians will be more cautious in the way they spend money. Politicians have in the past been able to build visionary projects such as the EU, or high speed rail, or invest in reducing greenhouse gas emissions; in Europe, domestic greenhouse gas emissions fell by over 15 % between 1990 and 2010, due also to improvements in energy and fuel efficiency, so there is no reason to think they could not do so again.(1)

As a result, we do not need a separate group for taking these decisions for the politicians, as they would do it by themselves.

(1) European Environment Agency, “Mixed success for European environmental policies”, Spiral, 2012 http://www.spiral-project.eu/content/mixed-success-european-environmental-policies"
Candidate 3: "Politicians only think about themselves and only for the short term looking for re-election. The result will be the money used for populist measures even if it is not sustainable. The example of Greece proves this idea, as there public sector wages rose 50% between 1999 and 2007, despite having a deficit (1). Everyone wants more money, so will vote for such measures. They don’t think about the question of how that money will be acquired in the long run so will go for unsustainable policies that kick the problem to future generations. Only an independent body will be immune to short-termism.

(1) ‘Eurozone crisis explained’, BBC News, 27 November 2012, http://www.bbc.co.uk/news/business-13798000"
Candidate 4: "Is it better that money should be wasted immediately or should the return be spread out? Any prudent population would choose the latter. Most populations are wary of untrammelled exploitation of natural resources of the kind being promoted for fear of the devastating environmental impact.

Recent failures of big companies to protect the environment, like Chevron(1), only add to this discontent and lack of trust. The case of Rosia Montana Gold Company which wants to get a permit to mine for gold in Romania is also very illustrative. Following the request of this company to exploit certain mountainous areas in the Carpathian, a series of nation-wide protests have emerged. Thousands of people from across the nation are going out on the streets on a weekly basis to protest against this project.(2)

An independent fund won’t disincentivise investment; money will still be returned to the nation’s treasury to be used by politicians but because it takes longer to flow into the treasury there is less incentive for reckless investment that disregards the people’s will.

(1) “Chevron's Toxic Legacy in Ecuador”, Rainforest Action Network, http://ran.org/chevrons-toxic-legacy-ecuador

(2) Vlad Ursulean “Stopping Europe's biggest gold mine”, Al Jazeera, 27 Nov 2013 http://www.aljazeera.com/indepth/features/2013/11/stopping-europe-biggest-gold-mine-20131117102859516331.html"
Candidate 5: "This is based on several potentially faulty assumptions first the trust fund may not be aimed at helping to prevent pollution of clean up afterwards; it may simply be given the role of generating the biggest possible return. Second it assumes that politicians see themselves as tied to the people so that they have a reason to prevent pollution, in practice in an autocracy or a faulty democracy this may not be the case. The desire may therefore be to invest as much money as possible in the trust fund and therefore to exploit the resource as fully and cheaply as possible. Even if the money is going into a trust fund the self interest is in polluting as we should remember that dictators are likely to believe they will still be around to see the benefits in decades to come."
Candidate 6: "The change need not be dramatic; it need not apply to all oil revenues at once. For example only revenues from new fields could go into the independent fund while existing revenues to the government are maintained. Services therefore won’t need to undergo contraction.

The impact on politics would also be minor; people elect those who get things done not those who blame others for their problems. Moreover all of the politicians will have the same constraint of a lack of funds so no single party will have an unfair advantage."
Candidate 7: "The biggest problem African countries face is instability whether from rebellions, coups, international conflicts, or terrorist organisation. The inevitable result is violence. What the population needs is safety to enable social benefits like healthcare and education. Money to pay for an army can therefore be a good thing. A good well paid professional force is needed to ensure stability and prevent conflict. Nigeria for example would surely have split apart without a large army; violence from terrorist groups like Boko Haram is increasing creating Muslim-Christian tensions.(1) Without stability there can be no democracy; votes can’t be held, so financing for stability is a good thing.

Egypt is a good example that shows a well-trained army can work for the benefit of democracy; it first stood aside while the people overthrew Egyptian dictator Mubarak and then stepped in when it was believed Morsi threatened democracy.

(1) “Nigeria’s troubles ,Getting worse”, The Economist, Jul 14th 2012 http://www.economist.com/node/21558593

(2) Siddique, Haroon, ‘Egypt army was ‘restoring democracy’, claims Kerry’, theguardian.com, 2 August 2013, http://www.theguardian.com/world/2013/aug/02/egypt-army-restoring-democracy-kerry"

Not all politicians are incapable of investing for the long term. After the economic crisis in which the world saw the perils of “living in the moment”, politicians will be more cautious in the way they spend money. Politicians have in the past been able to build visionary projects such as the EU, or high speed rail, or invest in reducing greenhouse gas emissions; in Europe, domestic greenhouse gas emissions fell by over 15 % between 1990 and 2010, due also to improvements in energy and fuel efficiency, so there is no reason to think they could not do so again.(1)

As a result, we do not need a separate group for taking these decisions for the politicians, as they would do it by themselves.

(1) European Environment Agency, “Mixed success for European environmental policies”, Spiral, 2012 http://www.spiral-project.eu/content/mixed-success-european-environmental-policies
