Is There Such A Thing As A “Resource Curse?”
A report in Science argues that the “resource curse” theory is dubious because scholars (like Jeffrey Sachs and Andrew Warner) have been looking at the wrong data in studies showing that countries heavily dependent on exports of natural resources are exceptionally prone to slow economic growth, high rates of poverty, authoritarian rule, corruption and violent conflict. The easy money from natural resources, the curse theory went, helped finance civil wars and also weakened civil institutions by enabling repressive governments to buy off opponents and stay in power despite policies that stifled the rest of the economy.
But the new report in Science argues that the causation goes in the opposite direction: The conflicts and bad policies created the heavy dependence on exports of natural resources. When a country’s chaos and economic policies scare off foreign investors and send local entrepreneurs abroad to look for better opportunities, the economy becomes skewed. Factories may close and businesses may flee, but petroleum and precious metals remain for the taking. Resource extraction becomes “the default sector” that still functions after other industries have come to a halt, according to the authors, C. N. Brunnschweiler of the Swiss Federal Institute of Technology and E.H. Bulte of the Oxford Center for the Study of Resource-Rich Economies.
They find that the curse vanishes when they look not at the relative importance of resource exports in the economy but rather at a different measure: the relative abundance of natural resources in the ground. Using that variable to compare countries, they report that resource wealth correlates with slightly higher economic growth and slightly fewer armed conflicts.
My guess is that having a lot of natural resources mostly means that when you screw up, you do it in a louder, more obnoxious fashion, with more attention paid to you. (Similarly, when you do succeed, like Texas did with oil, you do it more brashly.) Venezuela isn`t a whole lot different from Guyana or Colombia or Ecuador, and Nigeria isn`t that different from Cameroon or Benin. It`s just that the countries with oil attract more publicity. People go around holding seminars to discuss why isn`t Nigeria like Norway, but nobody is interested in the reasons why Togo is like Nigeria.
The reality is that there are a lot of boring poor countries with not much of either natural resources or human capital, and that normally nobody pays much attention to them. Occasionally, notice is paid to some place like Afghanistan or Yemen due to Al-Qaeda. In Yemen, the primary natural resource is that, most years, it rains. And then it turns out that Yemen, despite having practically nothing of anything, has managed to be, in its own impoverished fashion, extravagantly screwed up.