Rich in Natural Resources, Poor in Economic Development: The curse of natural resource-led development

The ‘resource curse’ is a conceptualization of the observation that countries rich in natural resources tend to have poorer economies (Sachs and Warner, 2001). Natural resource based economic growth may appear to be a pathway of development (e.g. utilizing natural capital to attract foreign investment, build capacity, and transition to export-based growth), but paradoxically this development often has adverse social and environmental impacts. Almost in every case since the 1970s, resource-abundant countries have languished in economic growth, even when controlling for many geographic and climatic variables (Sachs and Warner, 2001). Mining in Latin America is an excellent case study of natural resource led development. Many institutions that can ensure responsible development of mines are often not in place or very weak, further more money generated by mining is often weak at transforming mineral wealth into human development (Bebbington and Bury, 2009). This points towards a world systems theory argument (Wallerstein, 2011) that these natural resources are utilized to export to ‘core countries’, while serving little to improve ‘periphery countries’. One approaches to protect economies when developing of natural resources is through nationalization. Nationalized resources belong to a people, and managed by the government in order for the betterment of them, not exploited for the benefit of a few private interests (Perreault, 2006). Nationalizing, however, has led to corruption or the use of natural resources for political gain as opposed to economic benefit. Developing sustainability enhancing, resource governance institutions before resource-based growth occurs maybe the key (Bebbington and Bury, 2009). With many poorer countries rich in natural resources, it is imperative to better grasp the origins of failure in natural resource-led development (Sachs and Warner, 2001). While natural resources maybe a curse, they still offer an attractive promise for development. The question remains how to constrain the development towards good.

Works Cited

Bebbington, A. J., & Bury, J. T. (2009). Institutional challenges for mining and sustainability in Peru. Proceedings of the National Academy of Sciences,106(41), 17296-17301.

Perreault, T. (2006). From the Guerra Del Agua to the Guerra Del Gas: resource governance, neoliberalism and popular protest in Bolivia. Antipode,38(1), 150-172.

Sachs, J. D., & Warner, A. M. (2001). The curse of natural resources.European economic review, 45(4), 827-838.

Wallerstein, I. (2011). The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century, With a New Prologue (Vol. 1). University of California Pr.