Resource Bonanzas and Elite Reconfiguration.
Evidence from an Electoral Autocracy
P5-5
Presented by: Felix Schilling
How do political elites in electoral autocracies distribute rents from natural resource windfalls?
While resource extraction is mostly conducted by large multinational firms, political elites can leverage their power in office to distribute resource windfalls for themselves with huge personal gains. However, it is unclear how exactly national political elites can extract money from corporate endeavors they do not directly control. Importantly, most members of the political elite are not directly involved in legislative or parliamentary committee affairs with regulatory authority over the natural resource industry and cannot leverage such positions.
In this paper, we identify the political elite as Politically Exposed Persons (PEPs) and show that PEPs respond to natural resource discoveries and corresponding FDI inflows by establishing their own firms as vehicles for extracting money from the multinational corporations that invest in the natural resource industry. However, different factions of PEPs benefit differently from establishing corporate connections with multinationals, implying that the inflow of resources leads to a reconfiguration of wealth between competing elite groups. The study of how elites use their political offices to extract rents from natural resources – and how they distribute those rents between competing elite factions – is hampered by the fact that natural resource rents are not randomly distributed. We circumvent this problem by marshalling evidence from the case of Mozambique, which experienced a sudden and unexpected surge in Foreign Direct Investments (FDI) after 2009, spurred by discovery of large reserves of natural gas.
While resource extraction is mostly conducted by large multinational firms, political elites can leverage their power in office to distribute resource windfalls for themselves with huge personal gains. However, it is unclear how exactly national political elites can extract money from corporate endeavors they do not directly control. Importantly, most members of the political elite are not directly involved in legislative or parliamentary committee affairs with regulatory authority over the natural resource industry and cannot leverage such positions.
In this paper, we identify the political elite as Politically Exposed Persons (PEPs) and show that PEPs respond to natural resource discoveries and corresponding FDI inflows by establishing their own firms as vehicles for extracting money from the multinational corporations that invest in the natural resource industry. However, different factions of PEPs benefit differently from establishing corporate connections with multinationals, implying that the inflow of resources leads to a reconfiguration of wealth between competing elite groups. The study of how elites use their political offices to extract rents from natural resources – and how they distribute those rents between competing elite factions – is hampered by the fact that natural resource rents are not randomly distributed. We circumvent this problem by marshalling evidence from the case of Mozambique, which experienced a sudden and unexpected surge in Foreign Direct Investments (FDI) after 2009, spurred by discovery of large reserves of natural gas.