Linked to what? Economic linkages in an extractive economy

Abstract

There are two main ways in which resource extraction can lead to prosperity for extractive regions. The first involves temporally delimited benefits—those that can only exist so long as extraction is taking place—while the second involves the potential for benefits that will endure beyond the period of extractive operations. As the scale of extraction has increased over time there has been a dramatic reduction in the potential duration of temporally delimited benefits for resource deposits of any given magnitude. While there remains a possibility that extraction could still be associated with benefits that are not temporally delimited, primarily through the development of “linked” industries, many studies have documented cases where linked industries have failed to emerge. Still, a full test of the possibility requires that we also look for cases in which a significant degree of linkage capture didoccur. The clearest 20th century example we have been able to identify involves the offshore oil industry in southern Louisiana, where consistent growth in extraction was coupled with what appeared to be massive diversification. Even in this case, however, increased technological specialization, relative to that of earlier centuries, meant that the “linked” industries ultimately proved to have few markets that were not tied to the specific forms of extraction they served. Rather than representing diversification and development, the linked industries thus proved to be temporally delimited as well, experiencing a decline in employment during the oil price crash of the 1980s that actually proved to be at least as severe as the “bust” in the oil‐extraction sector itself.

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