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Oil May Not Grease Friendship

Authors: Amity Shlaes, Former Hayek Senior Fellow for Political Economy, and Gaurav Tiwari
March 26, 2008
YaleGlobal

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In the post-Cold War period, researchers have long wondered why some countries befriend the US. They have noted some common characteristics of US friends—cultural affinity, urban dominance, level of entrepreneurship and so on. They also noticed that oil wealth can correlate with hostility towards the US. Much of this work, while evocative, is anecdotal.

We decided to examine statistical patterns involving three factors—entrepreneurship, oil wealth and a country’s friendship towards the US. After all, perhaps these three factors create a golden triangle, three points in a relation that could be of use to international organizations and national governments. US diplomats like to deal with big partners—the national oil company, the captains of the industry—and tend to be less aware of the smaller businesses that are typically entrepreneurial. If data show that entrepreneurial countries are indeed friendly and oil countries less friendly, then the US Treasury and the US State Department have a concrete reason to spend more time than they have done to date fostering or at least being aware of small enterprise in foreign countries.

We selected proxies for three characteristics—the extent to which a country is friendly to entrepreneurship, the extent to which oil dominates its economy and the extent of its friendship to the US.

To measure the entrepreneurial impulse, we examined data collected by the World Bank. To measure the influence of oil on an economy, we looked at oil as a share of exports. To rate a country’s political friendliness toward the US, we look at voting patterns in the UN General Assembly.

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