Credit: Asia Times.
At the outset, let’s repeat the obvious. If an oil-rich country, such as Saudi Arabia, could and does pump out all its oil in one year (a wild assumption) and sells it at today’s going rate (another wild assumption), then the country would be rich as Croesus.

Now, what about the next year if it spent it all this year? Would this spell success? Well, things would not be so hot. The country would be back where it was before its oil was discovered then depleted – namely poor as poor could be. Just looking at today’s income level in a depletable resource-based economy misses the point.

Oil is a part of a country’s stock of capital (the heritage of all generations) and the size of this stock must not be allowed to diminish. As important, for the preservation of social and economic justice, each and every citizen must receive the same income flow from this stock of capital now and in the future.

Most, if not all, experts argue that this can best be done by developing a diversified non-oil based economy that compensates for oil depletion (physical and human capital to replace the oil stock capital).

While this could compensate for oil depletion, for over 30 years we have maintained that, even if totally successful in this quest, it would in all likelihood fail when it came to preserving social and economic justice. We will elaborate on how justice can be best preserved, while compensating for oil depletion, in a future article.
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