Book reviews: Resource country blues

Two new books examine the rising class of super-wealthy and the struggle for resource-flush nations to manage their money.

Over the past 10 years, a historically unique combination of long bull markets, low barriers to global trade and low interest rates promoting relatively cheap access to money has produced what Wall Street Journal reporter Robert Frank likes to call the New Rich. Frank’s Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich (Crown, $30) is a hilarious quasi-anthropological romp through the brave new world of “Richistan”—Frank’s tongue-in-cheek term for this new class of super-wealthy. It touches on everything from the resurgence of butlering—salaries now start at $80,000—to the gamesmanship of philanthropy on the Palm Beach charity circuit.

Infused with the surreal quality of a society where a 100-foot yacht just doesn’t cut it anymore, the book ends on a sober note. Frank cites rising income inequality contrasted with crumbling infrastructure, and urges today’s super rich to consider their wealth a responsibility as well as a right.

The “resource curse” is an economic term that describes the failure of resource-rich countries to efficiently manage their wealth. In the foreword to Escaping the Resource Curse (Columbia University Press, $32), a carefully edited selection of essays by economists and industry specialists on how to counterbalance this phenomenon, financier and philanthropistGeorge Soros explains how three different processes come into play: the currency spikes, hurting the competitive position of other industries; commodity prices fluctuate, disrupting prices throughout the economy; and political conditions polarize, with those benefiting directly from the resource windfall challenging policies that might distribute it more widely.

Sound familiar? In light of our ongoing resource boom, all those interested that Canada fall closer to the Norwegian than Nigerian end of the resource-wealth spectrum should take note of this book. As contracts specialist David Johnston explains in his chapter, “How to Evaluate the Fiscal Terms of Oil Contracts,” nations that escape the resource curse tend to negotiate royalty regimes toward optimally desirable outcomes for both international oil companies and those living in the countries affected. The overarching theme? That negotiators on both sides be as clear and transparent as possible about the contracts they are negotiating, and engage directly with public interest groups.

With this collection, editors Macartan Humphreys, Jeffrey D. Sachs and Joseph E. Stiglitz have created a primer on ways governments and multinationals can ensure that resource wealth becomes not a curse but rather a source of sustained wealth for generations to come. Canadian policy-makers, take note.