Rising leaders from some of the world’s most complex and challenging nations, including China, Russia, Ukraine, Iraq, Kenya, Nigeria, South Africa, and the Democratic Republic of the Congo, have just completed a three-week seminar at Stanford as Draper Hills Summer Fellows on Democracy and Development. This year’s extraordinary class of fellows included members of parliament, government advisors, civic activists, leading jurists, journalists, international development experts and founders of non-governmental organizations (NGOs).

Each year, several hundred applicants apply to FSI’s Center on Democracy, Development, and the Rule of Law (CDDRL), the convener of the program, for the 26-28 slots available to study and help foster linkages among democracy, economic development, human rights, and the rule of law. Now in its fifth year, the program has received generous gifts from William Draper III, a Silicon Valley entrepreneur, in honor of his father, Maj. Gen. William H. Draper, Jr., a chief advisor to Gen. George Marshall and chief diplomatic administrator of the Marshall Plan in Germany, and Ingrid von Mangoldt Hills, a former journalist, in honor of her husband, Reuben Hills, a leading San Francisco philanthropist and president and chairman of the board of Hills Bros. Coffee.

Draper Hills Summer Fellows are innovative, courageous, and committed leaders, who strive to improve governance, enhance civic participation, and invigorate development under very challenging circumstances," said CDDRL Director Larry Diamond. “This year’s fellows were absolutely extraordinary, learning from us we hope, but also teaching all of us about the progress they are making and the obstacles they confront in a diverse set of countries.  We were not only sobered by the difficulties they must address on a daily basis but also uplifted by their accounts of programs that are working to deepen democracy, improve government accountability, strengthen the rule of law, energize civil society, and enhance the institutional environment for broadly shared economic growth.”

The three-week seminar is taught by an all star faculty, which in addition to Diamond, includes CDDRL Deputy Director Kathryn Stoner, Stanford president emeritus and constitutional law expert Gerhard Casper, FSI Deputy Director and political science professor Stephen D. Krasner, Erik Jensen and Allen S. Weiner from the Stanford law school, Avner Greif from the Department of Economics, Peter Henry from the Graduate School of Business, FSI Senior Fellow Helen Stacy, former FSI Director and current Program on Food Security and the Environment deputy director Walter P. Falcon, Mark C. Thurber, acting director of FSI’s Program on Energy and Sustainable Development, and Nicholas Hope, director of the Stanford Center on International Development.

Other leading experts and practitioners who engaged the fellows included democracy and governance expert Francis Fukuyama, who joins CDDRL as Olivier Nomellini Senior Fellow in July 2010, National Endowment for Democracy President Carl Gershman, United States Court of Appeals Judge Pamela Rymer, International Center on Nonviolent Conflict founding chair Peter Ackerman, the center’s president, Jack DuVall, former Peruvian president Alejandro Toledo, and former Secretaries of State George Shultz and Condoleezza Rice.

Faculty devoted the first week of the seminar to defining the fundamentals of democracy, good governance, economic development, and the rule of law, and in the second week turned to the issue of transitions and the feedback mechanisms between democracy, development, and a predictable rule of law. The third week examined the critical – and often controversial – role of international assistance to foster and support democracy, judicial reform, and economic development, including the proper role of foreign aid.

Against this backdrop, fellows emphasized domestic imperatives for fostering growth, social inclusion, and transformation, centering on the importance of political will and sound institutions.  In session after session, they wrestled with the concrete and all too common impediments to progress—from corruption, cronyism, and authoritarian regimes, to the fragility of conflict-ridden, multi-ethnic polities.  As an activist from strife-torn Iraq said, “Democracy is not just a way of governing. It is a way of living, a way of thinking about life.”“Democracy is not just a way of governing. It is a way of living, a way of thinking about life”

In spirited debates, in the formal seminar sessions and beyond the classroom to the Munger residence where the fellows stayed, the fellows stressed how they had all taught and learned from each other.  A rising leader from South Africa aptly summarized, “We have dispelled each other’s myths.”

As the Draper Hills Fellows expressed their profound gratitude to their faculty and mentors, they reinforced the importance of staying in touch through a virtual online community – a “common space” as defined by a member of parliament from Ukraine, that would let them look forward and look back, perhaps a decade from now, at case studies of success and failure, and the all important roles that political will and leadership played in determining outcomes.  “Stay tuned,” said Diamond and Stoner-Weiss. “Important lessons are still to come.”

Peter B. Henry, the Matsushita Professor of International Economics at Stanford's Graduate School of Business and an affiliated faculty member with the Freeman Spogli Institute’s Center on Democracy, Development, and the Rule of Law (CDDRL), has been appointed by President Obama to the President’s Commission on White House Fellowships, the White House has announced. This distinguished and diverse group of 28 accomplished Americans is responsible for recommending an exceptional group of men and women to the President for selection as White House Fellows, America’s most prestigious program for leadership and public service.

“The men and women of this commission embody what makes the White House Fellows program so special,” said President Obama in making the June 17 announcement. “These leaders are diverse, non-partisan, and committed to mentoring our next generation of public servants. I am confident that they will select a class of White House Fellows that demonstrate extraordinary leadership, strong character, and a deep commitment to serving their country.”

“Peter Henry is a superb scholar, teacher, leader, and mentor,” said CDDRL Director and FSI and Hoover Institution Senior Fellow Larry Diamond. “This recognition is richly deserved and will give Peter a national venue to continue developing a new generation of leaders, scholars, and policy practitioners.”

Alumni of the White House Fellows Program include former Secretary of State Colin Powell, retired U.S. Army General Wesley Clark, and author Doris Kearns Goodwin.

Henry is also the John and Cynthia Fry Gunn Faculty Scholar and Associate Director of the Center for Global Business and the Economy at Stanford’s business school.  He is a Senior Fellow at the Stanford Institute for Economic Policy Research (SIEPR), a Research Associate at the National Bureau of Economic Research, a Nonresident Senior Fellow of the Brookings Institution in Washington, D.C., and a member of the Council on Foreign Relations.

Among the numerous awards and honors Henry has received are a National Science Foundation Early CAREER Development Award, a National Science Foundation Minority Graduate Fellowship, a Ford Foundation Graduate Fellowship, and the National Economic Association Dissertation Prize.  He has published several articles in journals and books, including “Capital Account Liberalization, the Cost of Capital, and Economic Growth” in the American Economic Review and “Perspective Paper on Financial Instability” in Bjorn Lomborg’s Global Crises, Global Solutions.

Dr. Henry received his BA in Economics at the University of North Carolina at Chapel Hill, and was later a Rhodes Scholar at Oxford University, where he earned a BA in Mathematics.  He received his PhD in Economics from the Massachusetts Institution of Technology.

Professor Henry is also part of the distinguished Stanford faculty group that teaches in the Draper Hills Summer Fellows on Democracy and Development Program each summer at Stanford.  From some 800 applicants, this program selects 25 to 30 rising leaders from important countries in transition – such as Russia, Iran, Iraq, Pakistan, Afghanistan, Nigeria, and Zimbabwe—and brings them to Stanford to examine and help foster linkages among democracy, development, human rights, and the rule of law in their countries.  Other Stanford faculty teaching the Draper Hills Summer Fellows include Stanford President Emeritus Gerhard Casper, FSI Deputy Director Stephen Krasner, CDDRL Director Larry Diamond and Deputy Director Kathryn Stoner-Weiss, FSI Senior Fellow Helen Stacy, Avner Greif from economics, and Erik Jensen from Stanford Law School.

Joshua Cohen's Program on Global Justice (PGJ), which explores issues at the intersection of political norms and global political-economic realities, has joined CDDRL Center Director Larry Diamond has announced.  Cohen, a professor of political science, philosophy, and law, came to Stanford from the Massachusetts Institute of Technology (M.I.T.) in 2006 to launch a new program on global justice at FSI.

The aim of his program, Cohen said, "is to build dialogue and research that integrates political values - toleration, fairness, and the common good - into discussions about human rights, global governance, and access to such basic goods as food and clean water."  "These issues of global politics are all ethically consequential," Cohen points out, "and addressing them well requires a mix of philosophical thought with the best current social-scientific research."

CDDRL Director Diamond and Associate Director for research Kathryn Stoner joined in saying "We are delighted to welcome Josh Cohen to our team.  His path-breaking work bridges the normative, empirical, and policy dimensions of our Center's ongoing concerns for democracy, equitable economic development, and the rule of law."

Under Cohen, the Global Justice Program's largest effort has focused on the Just Supply Chains project. As globalization of production creates a need for new models of fair treatment for workers in global supply chains, fresh thinking is also needed on the role of unions, the rights of workers to associate, and the role of trade agreement in promoting just working conditions.

Cohen, Diamond, and Terry Winograd, Stanford professor of computer science, have also initiated a the new Program on Liberation Technology which brings together Stanford colleagues from computer science and applied technology with social scientists to explore ways that new information technologies can improve economic, political, and social conditions in low income countries, and materially improve human lives. As Cohen and Diamond note, Liberation Technology "seeks to understand how information technology can be used to defend human rights, improve governance, empower the poor, promote economic development, and pursue of variety of other social goods."  

A prolific author, Cohen has written extensively on issues of democratic theory, especially the theory of deliberative democracy, and implications of that idea for personal liberty. He is the author with Joel Rogers of On Democracy (1983), Rules of the Game (1986), and Associations and Democracy (1995). A volume of his selected papers, Philosophy, Politics, Democracy is forthcoming from Harvard University Press, and his Rousseau: A Free Community of Equals, is forthcoming from Oxford University press.  

Cohen is also the editor of Boston Review, a bi-monthly magazine of political, cultural, and literary ideas, and has edited 18 books that grew out of forums that appeared in the Review. He moderated the Global Poverty and Development Course offered by Google.org in 2007 for google.com employees. The ten week-course addressed issues ranging from growth and globalization to education and urbanization, and can still be watched on YouTube.

Diamond, Stoner-Weiss, and Cohen are part of the distinguished Stanford faculty group who lead the Just Supply Chains each summer.  This highly competitive program each year selects from 600-800 applicants some 30 rising leaders from major transitioning countries such as Russia, Iran, Iraq, Pakistan, Afghanistan, Nigeria, Kenya, and Zimbabwe and brings them to Stanford to examine and foster linkages among democracy, sustainable economic development, and good governance. As Diamond and Cohen point out, in today's challenging environment, putting new information technologies to socially, politically, and economic constructive uses is a powerful tool and of growing interest to many of these rising leaders from transitioning countries.   

Stephen D. Krasner, the Graham H. Stuart Professor of International Relations, and senior fellow at the Freeman Spogli Institute for International Studies (FSI) and the Hoover Institution, has been named deputy director of FSI, announced FSI Director Coit D. Blacker, the Olivier Nomellini Professor in International Studies. Larry Diamond, a senior fellow at FSI and the Hoover Institution, and professor, by courtesy, of political science and sociology, has been named director of FSI's Center on Democracy, Development, and the Rule of Law (CDDRL).

Krasner succeeds political science Professor Michael McFaul, former deputy director of FSI and CDDRL director, who has joined the Obama administration as special assistant to the president for National Security Affairs and senior director for Russian and Eurasian Affairs at the National Security Council.  Diamond will direct CDDRL while McFaul is on leave.

"We are delighted that Steve Krasner and Larry Diamond are assuming these leadership roles at this dynamic time in FSI's growth and development," said Blacker. "Steve and Larry's exemplary scholarship, research, and teaching, and their passionate commitment to the expansion of democracy and good governance, are a wellspring of inspiration to Stanford faculty and students, and to current and aspiring leaders the world over."

Krasner served as deputy director of FSI and CDDRL director from January 2003 to January of 2005. He then served as director of policy planning at the U.S. Department of State from February 2005 through April of 2007. In that role, Krasner was the driving force behind foreign assistance reform designed to more effectively target American foreign aid. He was also involved in activities related to the promotion of good governance and democratic institutions around the world.

Among extensive publications, Krasner is the author of Defending the National Interest: Raw Materials Investment and American Foreign Policy (1978), Structural Conflict: The Third World Against Global Liberalism (1985), and Sovereignty: Organized Hypocrisy (1999). Publications he has edited include Problematic Sovereignty: Contested Rules and Political Possibilities (2001). He taught at Harvard and UCLA before coming to Stanford in 1981.

Krasner received a BA in history from Cornell University, an MA in international affairs from Columbia University, and a PhD in political science from Harvard. He is a fellow of the American Academy of Arts and Sciences and a member of the Council on Foreign Relations.
Diamond is the founding coeditor of the Journal of Democracy, the co-director of the International Forum for Democratic Studies of the National Endowment for Democracy, and has been coordinating CDDRL's democracy program. His newest book, The Spirit of Democracy: The Struggle to Build Free Societies Throughout the World (Times Books, 2008), explores the sources of democratic progress and stress and the prospects for future democratic expansion.

Diamond's other published works include Squandered Victory: The American Occupation and the Bungled Effort to Bring Democracy to Iraq (Times Books, 2005), Developing Democracy: Toward Consolidation (1999), Promoting Democracy in the 1990s (1995), and Class, Ethnicity, and Democracy in Nigeria (1998).

In May 2007, Diamond was named "Teacher of the Year" by the Associated Students of Stanford University for teaching "that transcends political and ideological barriers." At Stanford Commencement ceremonies in June 2007, he was honored with the Dinkelspiel Award for Distinctive Contributions to Undergraduate Education and cited, inter alia, for "the example he sets as a scholar and public intellectual, sharing his passion for democratization, peaceful transitions, and the idea that each of us can contribute to making the world a better place."

Diamond received a BA, MA and PhD from Stanford, all in sociology.

Krasner and Diamond are part of the distinguished Stanford faculty group who lead the Draper Hills Summer Fellows on Democracy and Development Program each summer, which brings to Stanford some 30 rising leaders from major transitioning countries such as Russia, Iran, Iraq, Pakistan, Afghanistan, Nigeria, and Kenya to examine and foster linkages among democracy, sustainable economic development, and good governance.

Larry Diamond, Senior Fellow at the Freeman Spogli Institute for International Studies at Stanford and the Hoover Institution was appointed Director of the Center on Democracy, Development, and the Rule of Law in February 2009, when former Director Michael McFaul went on public service leave to join the National Security Council in the Obama Administration.

Larry Diamond, Senior Fellow at the Freeman Spogli Institute for International Studies at Stanford and the Hoover Institution was appointed Director of the Center on Democracy, Development, and the Rule of Law in February 2009, when former Director Michael McFaul went on public service leave to join the National Security Council in the Obama Administration.

Diamond is the founding coeditor of the Journal of Democracy, the co-director of the International Forum for Democratic Studies of the National Endowment for Democracy, and has been coordinating CDDRL's democracy program. His newest book, The Spirit of Democracy: The Struggle to Build Free Societies Throughout the World (Times Books, 2008), explores the sources of democratic progress and stress and the prospects for future democratic expansion.

Diamond's other published works include Squandered Victory: The American Occupation and the Bungled Effort to Bring Democracy to Iraq (Times Books, 2005), Developing Democracy: Toward Consolidation (1999), Promoting Democracy in the 1990s (1995), and Class, Ethnicity, and Democracy in Nigeria (1998).

In May 2007, Diamond was named "Teacher of the Year" by the Associated Students of Stanford University for teaching "that transcends political and ideological barriers." At Stanford Commencement ceremonies in June 2007, he was honored with the Dinkelspiel Award for Distinctive Contributions to Undergraduate Education and cited, inter alia, for "the example he sets as a scholar and public intellectual, sharing his passion for democratization, peaceful transitions, and the idea that each of us can contribute to making the world a better place."

Diamond received a BA, MA and PhD from Stanford, all in sociology.

The Center on Democracy, Development, and the Rule of Law (CDDRL) at Stanford University is pleased to announce its new class of %fellowship1%. This year’s fellows – 26 outstanding civic, political, and economic leaders from 23 countries in transition – have been selected from more than 800 applications. They will be on the Stanford campus for three weeks, from July 28 to August 15, 2008.

Since its inception, the Summer Fellows Program has created a network of more than 90 emerging leaders from 30 transitioning countries including Iraq, Afghanistan, Iran, Pakistan, China, Russia, Nigeria, Kenya, and Rwanda. Draper Hills Summer Fellows are former prime ministers and presidential advisors, senators and attorneys general, journalists and civic activists, academics and members of the international development community. They are united in their dedication to improving or establishing democratic governance, economic growth, and the rule of law in their countries.

The three-week program is led by an interdisciplinary (and all-volunteer) team of leading Stanford University faculty associated with the center. Class sessions, however, are not only led by CDDRL-affiliated faculty and researchers but also by the fellows themselves, who focus discussions on the concrete challenges they face in their ongoing development work. In this way, fellows have the opportunity to learn from one another’s rich experiences in the field of international political and economic development.

One of the selected fellows, an opposition politician from Singapore, was prevented from leaving her home country shortly before the program began.

Conventional wisdom holds that the OPEC oil cartel has the world in its grasp. It can manipulate prices by tinkering with supplies. Last month OPEC released a new study on world oil demand that seemed to signal the cartel was readying to tighten the taps because higher prices were slaking the world's thirst for oil. The American Petroleum Institute released fresh data showing that demand for oil products in the United States (the world's largest market) dropped a whopping 3 percent from the year earlier. The news about lower demand has caused oil prices to fall a bit, and all eyes are on OPEC's wizards to tighten supplies.

But the conventional wisdom is mostly wrong. OPEC (which stands for the Organization of the Petroleum Exporting Countries) is no wizard. For the most part, its actions lag behind fundamental changes in oil supply and demand rather than lead them. OPEC looks like a masterful cartel when, in fact, it is mainly just riding the waves.

It is hard to figure out exactly what goes on behind's OPEC's closed doors, but glimpses are possible by probing what the cartel members say about prices and how they set quotas. Over the last five years, OPEC members have announced ever-higher price goals only after the market had already delivered those high prices. As the market has soared, OPEC has followed. Only in the last few months has Saudi Arabia suggested that the cartel would be better off if prices reversed because high prices would encourage the world's big oil consumers to wean themselves from oil. It proffered $125 a barrel. The markets shrugged and kept on rising until real facts about slowing demand revealed that fundamentals were changing.

OPEC also sets quotas so that each member knows its role. Throughout its history, OPEC has faced the difficult task of holding the cartel in the face of strong incentives by each member to cheat. Today's oil market makes that job easy because nearly every member, except Saudi Arabia, is producing at full capacity. OPEC, more or less, has nothing to do.

In fact, the last time OPEC made a major adjustment to its quotas—September 2007—it jiggered them to reflect what its members were already pumping. Algeria got a big boost because it was already supplying nearly 50 percent more than its quota. Kuwait, Libya and Qatar also got boosts that aligned their OPEC quotas with existing reality. OPEC also set, for the first time, a quota on Angola's output. Since then, Angola has attracted a steady stream of new production projects, which makes it inevitable that OPEC will adjust Angola's quota to reflect the new reality. (Iraq has no quota; it has troubles enough without pretending to align its oil output to OPEC strictures.)

Nigeria and Venezuela got haircuts because their political troubles meant they were already producing far less than their quotas. Indonesia also cut its quota and a few months later left OPEC because it realized that as a big oil user it actually had more in common with oil importers than its fellow OPEC members. These changes in quotas were reflections of political realities that OPEC doesn't control.

Today's oil cartel, even more than in the past, is really about Saudi Arabia. But Saudi Arabia also is no wizard at the controls of the world market. The Saudis can adjust their output a bit since they control nearly all of spare capacity in the world market. (Earlier this month they pledged another 200,000 barrels per day to dampen pressure from the United States and other governments that are reeling from high oil prices. But that move was more symbolic than real as the markets were already expecting the new supplies.)

Saudi Arabia is on the front lines of the new reality in world oil supply. It is proving much harder and more costly to bring on more supplies. The Saudis have an ambitious plan to increase output about one third over the coming decade, but they are finding that will be a stretch. Their fellow OPEC members are in a similar situation, and those hard facts also produce high oil prices. In fact, the Middle East members of OPEC are, today, producing at just the same level as they were three decades ago because none of them invested much in finding and producing new supplies. High prices into the future reflect these fundamental facts rather than the assumption that OPEC is a masterful cartel.

Conventional wisdom holds that because OPEC is raking in more cash than ever, it has never been stronger than it is today. In fact, OPEC has rarely been weaker. It is the accidental beneficiary of forces that have caused today's high prices, and it will be nearly as powerless when prices come down.

The real solutions to today's high oil prices require more attention to demand. Blaming OPEC, while good political theater, won't have much impact. Legislation now working its way through the U.S. Congress would actually attempt to break up the oil cartel. Such schemes won't work, and the political effort would be better spent on policies that redouble the nation's efficiency, producing more oil from diverse sources here at home, and in finding ways to move beyond oil altogether.

As oil prices surge through $140/barrel at the time of writing, surely one can at least count on the invisible hand of the market to drive further exploration and production and ultimately bring more supplies on line, right? Or perhaps, more ominously, high oil prices presage a darker future of shortage and conflict as global oil fields pass their geological “peak”? In fact, both positions miss a crucial point about the dynamics of the world oil market — that it is increasingly animated by the counterintuitive behavior of the state-owned oil and gas giants that now control the vast majority of the world’s hydrocarbon resources.

“On average national oil companies (NOCs) extract resources at a far lower rate than international oil companies (IOCs), leaving about 700 billion barrels of oil effectively ‘dead’ to the world market.”So-called “national oil companies,” or NOCs, own about 80 percent of the world’s proven reserves of oil, a percentage that has been on the rise as the persistent high price environment encourages countries to assert even tighter control over the rent streams flowing from their resources. NOCs are curious and variegated beasts, and, contrary to the popular imagination, some are highly capable both technically and organizationally. Brazil’s Petrobras is an acknowledged world leader in deepwater drilling, while Norway’s StatoilHydro is highly regarded for its competence and transparent business practices. Saudi Arabia’s national champion, SaudiAramco, is secretive to the outside world but generally considered to be a well-run, technically capable organization. At the other end of the continuum, government infighting and micromanagement hobble Mexico’s Pemex and Kuwait’s KPC. Once-independent PDVSA in Venezuela has been remade by President Hugo Chávez into a government puppet that spends liberally on social programs but consistently undershoots its production targets. And indeed some national oil companies are hardly oil companies at all — Nigeria’s NNPC, for example, is mostly a rent-seeking bureaucracy.

What NOCs do share in common as distinct from the familiar international oil companies (IOCs) is being answerable to a host government, which inevitably brings with it some focus on objectives other than simple profit maximization. Typically, an NOC arises originally from the desire of resource-rich governments (“principals”) to gain more effective control over resource extractors (“agents”) by creating an oil champion owned by the state. Prior to NOC formation, governments are frequently (and often justifiably) wary of exploitation by the foreign oil operators providing hydrocarbon extraction services. Lacking a deep understanding of the costs of production, states are simply unable to be sure they are taxing their agents appropriately. In addition to enhancing control over the hydrocarbon sector and the revenue it brings, states may hope for other benefits from the NOC: cheap energy to fuel a growing economy, employment and development of local industry to support the hydrocarbon sector, or even foreign policy leverage derived from control of key resources.

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A detailed study of NOC performance and strategy at the Program on Energy and Sustainable Development at FSI suggests a useful way of thinking about the effects of NOC resource domination on world oil and gas markets. Price versus quantity supply curves from classical economics assume that increased price will spur efforts to expand supply. Unfortunately, the counterintuitive reality for NOCs is that, when it comes to expanding supply in the current high-price environment, most either 1) can but don’t want to or 2) want to but can’t. The end result is what one could call a “backward-bending” supply curve — additional price increases do little or nothing to boost supply.

“The world has plentiful hydrocarbons in the ground, but that’s where many of them are going to stay due to the unique organizational and political dynamics of the NOCs.”In the “can but don’t want to” category are resourcerich governments that have decided they cannot assimilate any more money. Already, their investments are running into political resistance around the globe — witness Dubai’s failed attempt to purchase U.S. port management contracts, CNOOC’s failed bid for Unocal, or the increasing calls for curbs on the activities of sovereign wealth funds. Nations may decide they have enough cash and are better off leaving resources in the ground where they safely await monetization at a later date.

In the “want to but can’t” camp are countries and their NOCs that are simply unable to provide the stable political and regulatory climate to support additional build-out of expensive production and transport infrastructure. This situation is particularly common for natural gas, where long investor time horizons are needed to bankroll the multibilliondollar capital costs of pipelines or liquefied natural gas (LNG) terminals.

Meanwhile, international oil companies are left on the sidelines salivating helplessly over the vast reserves in NOC hands. Venezuela’s Orinoco region could yield hundreds of billions of barrels of heavy crude, but the government and a nowpliant PDVSA invite favored countries and their NOCs to explore rather than selecting the operators most capable of extracting the challenging but plentiful resource. Technical expertise and massive investment are required to fully develop vast Russian gas fields including Kovykta, Shtokman, and Yamal, but IOCs already burned by nationalizations and shifting rules in these and other Russian ventures are unlikely to be in a position to supply enough of either. In the face of dwindling resources they can tap, IOCs will need to diversify their business models, perhaps tackling technologically challenging options like oil sands or liquids from coal in conjunction with the carbon storage techniques that could make these palatable from a climate change perspective. Ironically, the only “easy” oil for IOCs has become oil that is geologically and technologically difficult.

While oil price is dependent on many factors (including global economic health) and is impossible to forecast with certainty, one can confidently predict continued tight supply of oil and gas, especially given global demand that will be propped up indefinitely by rising consumption in China and India. The world has plentiful hydrocarbons in the ground, but that’s where many of them are going to stay due to the unique organizational and political dynamics of the NOCs. Leverage over the market is weak; measures to reduce demand for oil and gas (though politically unpopular) or to spur development of alternative fuels and associated infrastructure (though slow to develop at scale) may be all that we have.

“Emerging democracies must demonstrate that they can solve governance problems and meet citizens’ expectations for freedom, justice, a better life, and a fairer society.”

If the big global story of the 1980s and 1990s was the remarkable expansion of democracy, the bad news of this decade is that democracy is slipping into recession. In the two decades following the Portuguese revolution in 1974, the number of democracies tripled (from 40 to 120) and the percentage of the world’s states that are at least electoral democracies more than doubled (to about 60 percent). Since the late 1990s however, there has been little if any net progress in democracy. To be sure, significant new transitions to democracy took place in countries like Mexico, Indonesia, Serbia, Georgia, and Ukraine. But globally, the democratic wave has been neutralized and is now at risk of being overtaken by an authoritarian undertow, which has extinguished democracy in such states as Pakistan, Russia, Nigeria, Venezuela, Bangladesh and Kenya. In fact, two-thirds (15) of all the reversals of democracy (23) since 1974 have taken place just in the last eight years, since the October 1999 military coup in Pakistan.

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Two other negative trends are important to note. One is the implosion of democratic openings in the Arab world. Under pressure from the George W. Bush administration beginning in 2003, several authoritarian Arab regimes liberalized political life and held competitive, multiparty elections. Then, Islamist political forces made dramatic gains in Egypt and Lebanon and won a majority of seats in Palestine and Iraq — and suddenly the Bush Administration got cold feet. Arab democrats who had surfaced and mobilized felt abandoned and betrayed. The liberal secular politician Ayman Nour, who had the temerity to challenge President Hosni Mubarak in Egypt’s first contested presidential election, languishes in prison three years later. The country’s political opening is now frozen, while more than a billion dollars in American aid continues to flow to the regime.

The second negative trend is that authoritarian states have, unfortunately, learned some of the lessons of democratic breakthroughs of the past decade, particularly the color revolutions that brought down neocommunist autocracies in Serbia, Georgia, Ukraine, and Kyrgyzstan. As a result, they have closed political space, swallowed up or arrested independent media, crushed independent political opposition, sabotaged or shut down innovative uses of the Internet, and sought to block or sever external flows of democratic assistance. Vladimir Putin’s Russia (with its sinister cabal of savvy Kremlin “political technologists”) has blazed the trail in this authoritarian pushback, but China, Belarus, Iran, Azerbaijan, Uzbekistan, and other “post” communist and Middle Eastern dictatorships have followed suit. To make matters worse, China and Russia have drawn together with the Central Asian dictatorships in a new club, the Shanghai Cooperation Organization, to formalize and advance their authoritarian pushback.

To renew democratic progress in the world, we must understand the reasons for the democratic recession. Authoritarian learning is one. Another has been the inconsistent and often unilateralist policies of the United States. Although President Bush has done much to put democracy promotion at the center of American foreign policy and has substantially increased funding for U.S. democracy assistance programs, he has also alienated potential allies in the effort to advance democracy globally by associating democracy promotion with the use of (largely unilateral) force, as in Iraq; by promoting democracy with a tone that was often self-righteous and a style that was too often poorly coordinated with our democratic allies; and then by failing to sustain pressure for democratic change when the going got rough in the Middle East.

Structural factors have also driven the recession of democracy. One has had to do with the global political economy. As the price of oil has gone up, the prospects for democracy have receded. Russia, Nigeria, and Venezuela have all seen their democracies slip back into authoritarianism as oil prices have skyrocketed, sending huge new infusions of discretionary revenue into the hands of autocratic leaders, which they have used to buy off opponents and strengthen their security apparatuses. In Iran and Azerbaijan, surging oil revenues have shored up authoritarian states that once seemed vulnerable.

A second and more pervasive factor has had to do with the performance of the new democracies. Some new democracies are holding their own (like Mali) and even making progress (like Brazil and Indonesia) in the face of enormous accumulated problems and challenges. But the general reality, even in these countries, is that democracy often does not work for average citizens. Rather, it is blighted by multiple forms of bad governance: abusive police and security forces, domineering local oligarchies, inept and indifferent state bureaucracies, corrupt and pliant judiciaries, and ruling elites who routinely shred the rule of law in the quest to get rich in office. As a result, citizens grow alienated from democracy and become susceptible to the patronage crumbs of corrupt political bosses and the demagogic appeals of authoritarian populists like Putin in Russia and Hugo Chávez in Venezuela.

“If democracies do not work better to contain crime and corruption, generate economic growth, relieve economic inequality, and secure freedom and a rule of law, people will eventually lose faith and turn to authoritarian alternatives.”Before democracy can spread further, it must take deeper root where it has already sprouted. Emerging democracies must demonstrate that they can solve governance problems and meet citizens’ expectations for freedom, justice, a better life, and a fairer society. If democracies do not work better to contain crime and corruption, generate economic growth, relieve economic inequality, and secure freedom and a rule of law, people will eventually lose faith and turn to authoritarian alternatives. Struggling democracies must be consolidated, so that all levels of society become enduringly committed to democracy as the best form of government and to the country’s constitutional norms and restraints. Western governments and international aid donors can assist in this process by making most foreign aid contingent on key principles of good governance: a free press, an independent judiciary, and vigorous, independently led institutions to control corruption. International donors also need to expand their efforts to assist these institutions of horizontal accountability as well as initiatives in civil society that monitor the conduct of government and press for institutional reform.

The only way to stem the democratic recession is to show that democracy really is the best form of government — that it can not only provide political freedom but also improve social justice and human welfare.