Peace is Bad For Business. See: Angolan Diamond Industry

Strange that a strong central system, even if it is run by warlords, may sprout the flowers of economic prosperity. Such was the case in Angola, a former Portuguese colony left in shambles when the Europeans left in 1975. Rebel commander Jonas Savimbi made good use of the chaos, armed himself and ran the country's diamond exporting industry, raking in good money from what are commonly known as blood diamonds.

Ray Fisman in Slate chronicles a case study of Savimbi's downfall, and how investors yanked capital as soon as he was killed in combat. Fisman writes:

Most people, including nearly all of my first-year MBA students, think that the key to business success is cheaply and efficiently producing something people want to buy. If this were the case, then war's end should have made Angolan miners and their shareholders richer as production costs plummeted. But the effect of peace on diamond mining in Angola shows that more important than producing something well is doing it better than the competition—and the potential competition.

The Inquirer has reported extensively on the Dirty Diamond Industry, so to go further, how emblematic is Fisman's example of the security situation in Angola of other industries thriving off of conflict?

From Houston to Luanda, First Class Oil

The demand in Luanda, Angola, for oil and gas lawyers is apparently on the up and up. Despite the fact that it is 7,644 miles from Houston to the capital on the southeastern coast of Africa, according to a report by Mary Flood in the Houston Chronicle, oilmen are now being accompanied three times a week on a direct flight.

Angola, a country of 16 million, had been ruled by the Portuguese since the 15th century and was left in shambles when the Europeans went running home after a socialist-inspired coup toppled the government in 1975. The country's long coastline could have been a valuable asset to the freed Angolans, but war ravaged the country. Only lately has the economy begun to grow, spurred by two unsurprising developments.

First, the country has oil reserves. It joined OPEC in 2006 and currently outputs about a 1.5 million barrels a day. That is expected to rise to 2 million. Second, China, as it has in much of Africa, in 2004 invested $2 billion to build the country's infrastructure. As usual, the money came as a line of credit, to be paid with future oil deliveries.

There is plenty of room for development: UNICEF reports that life expectancy in 2005 was just 41 years.

Return your seats to their full and upright position. The flight is run by World Airways and Angola's Sonair. Tickets come by invite only. According to Flood's report, traveling from Texas would otherwise take more than two days. 15-hours nonstop is a nice perk.

In fact, just today Houston-based Marathon Oil Corporation announced a deep water discovery off the coast.

Here's a suggestion for the oil industry workers and lawyers hopping on that flight. Ditch the in-flight magazine and read up on how the oil industry mucked up the Nigerian delta. Private flights don't seem that big a deal, but if anyone remembers the wretched history of Shell oil in Nigeria, bad business doesn't make for good industry, and the Chinese laboring away on roads and bridges may have the upper hand in this one.

(Image from Robert P. Byrne's flickr.)