Why Do Countries Rich In Oil Still Have Poverty?

This week's Planet Money report deals with what economists call the "paradox of oil." We'll meet two men who work in the African nation of Angola. One is an American, who makes big money in the oil business. The other is an Angolan who sells chewing gum on the street.

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STEVE INSKEEP, host:

Now let's spin the globe just a bit and visit another oil-producing state - the African nation of Angola on the continent's west coast. There we're going to meet two men who work down the block from one another. They have often wondered about each other but never really spoken.

One is American. One is Angolan. One makes big money in the oil business. One makes almost nothing. The relationship with these two strangers illustrates something that economists call the paradox of oil.

Here's Chana Joffe-Walt with our Planet Money team.

CHANA JOFFE-WALT: Gregory Scheidler's(ph) rent is $20,000 a month. He's the American. He doesn't pay the rent. The company does - the multinational oil company he works for, the reason he's in Luanda, Angola in the first place, and he's got a pretty nice spot.

Mr. GREGORY SCHEIDLER: It's a gated and guarded community with a swimming pool, tennis courts. There's a new shopping mall, the first in the country that's been built. There's a foreign school that's been built to support the children of the - primarily of the oil and gas industry. It's a very nice place inside the gates of this place and it's a completely different country when you walk out.

JOFFE-WALT: Gregory does try to walk out every day for lunch, but he walks past people filling up water bottles from air conditioner pipes, people living next door to piles of trash. Gregory basically has no personal relationships with any Angolans. Well, except for one, and he's not even really sure that counts. There is this kid he buys chewing gum from every day.

Mr. SCHEIDLER: Usually it's not much more than a smile, and so I'm actually quite curious about his life, where he lives, whether he's got an education or not. There's a lot of things I don't know about him.

JOFFE-WALT: So we over here at Planet Money arranged a meeting, the oil man and the gum seller. His name is Ningeeto(ph). They're in a basement in Angola on two cell phones with a translator, so you'll have to excuse the sound quality.

Mr. SCHEIDLER: One of the things that I enjoy about living in Luanda a is actually seeing you every day and buying chewing gum from you. And so I was curious - do you like your job?

NINGEETO: (Through translator) Not really. I don't like it.

JOFFE-WALT: It was pretty immediately clear this interaction was not going to be heartwarming. Ningeeto proceeds to tell Gregory that he hates his job, the police harass him, sometimes beat him because selling on the block is illegal, and he says he does it because he needs the money. He has to support his mom. He's 18 years old and has had two years of schooling.

Mr. SCHEIDLER: If you could choose, what kind of job would you like to have?

NINGEETO: (Through translator) If some good job would come up from a company, I would do anything.

JOFFE-WALT: But good jobs don't really come up for people like Ningeeto. These two people in this room, in this awkward conversation, are what is often called the paradox of oil, also known as the oil curse.

Angola is a country with a wealth of natural resources. It's one of Africa's largest oil producers, and yet 68 percent of its people live below the poverty line. So what's wrong here?

Herman Cohen is a retired U.S. diplomat. He worked in Angola for years and he says take a look at the Angolan government. The government gets a percentage of the oil that companies like Gregory's produce and they sell it, make money, and they could spend that money on schools and infrastructure and public health, but most of the time they don't.

Now, when Herman talks here about state-owned oil company Sonangol, he's talking about the Angolan government.

Mr. HERMAN COHEN (Cohen & Woods International): For example, a state-owned oil company has a private airline, involved in all sorts of businesses, and they even invest part of that money in other countries.

Well, you know, if you're a private company and you have a lot of money, you are looking to expand your wealth by investing, right? Well, some Angola's(ph) doing that, but the needs of Angola are much too great. They shouldn't be doing that.

JOFFE-WALT: Cohen says the Angolan government is behaving like a private company, and as long as that's the case, Gregory could produce hundreds of billions of barrels of Angolan oil and Ningeeto would still be selling gum on the street.

Chana Joffe-Walt, NPR News.

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