Resource curse

Definition

The resource curse refers to the paradox where countries rich in natural resources, such as oil and minerals, often experience slower economic growth, authoritarian governance, and social issues compared to countries with fewer natural resources. This phenomenon highlights how resource wealth can lead to negative consequences like environmental degradation and unequal wealth distribution, impacting both local and global dynamics.

5 Must Know Facts For Your Next Test

1. Countries with abundant natural resources often experience less democratic governance and higher levels of corruption due to reliance on resource revenues.
2. The resource curse can lead to significant environmental impacts, including deforestation, water pollution, and loss of biodiversity, as companies exploit resources without adequate regulation.
3. Economic volatility is common in resource-rich countries because their economies are often overly dependent on fluctuating global commodity prices.
4. Social inequality tends to be pronounced in nations affected by the resource curse, as wealth generated from resources is not distributed evenly among the population.
5. Efforts to mitigate the effects of the resource curse often involve diversifying economies, improving governance, and ensuring equitable distribution of resource wealth.

Review Questions

• How does the resource curse illustrate the relationship between natural resources and economic growth in certain countries?
  • The resource curse demonstrates that despite having abundant natural resources, some countries struggle with economic growth due to factors like mismanagement and corruption. Instead of using resource wealth to improve infrastructure or social services, governments may prioritize short-term gains, leading to volatile economies. This paradox shows that having natural resources does not guarantee prosperity and can even hinder development if not managed properly.
• Evaluate how environmental impacts of resource extraction are connected to the resource curse phenomenon.
  • Environmental impacts of resource extraction are closely linked to the resource curse because the exploitation of natural resources often leads to significant ecological damage. For instance, oil spills and deforestation not only harm local ecosystems but also threaten the livelihoods of communities dependent on these environments. Poor environmental management can exacerbate social tensions and further entrench the cycle of poverty and inequality characteristic of the resource curse.
• Assess the long-term implications of the resource curse on global economics and politics.
  • The long-term implications of the resource curse can reshape global economics and politics by creating unstable regions that struggle with internal conflicts fueled by unequal wealth distribution. As these nations face challenges such as political repression and economic volatility, they may also become less reliable partners in international trade. Moreover, their instability can lead to broader geopolitical consequences, including increased migration pressures and conflicts that may require international intervention.

Related terms

Dutch Disease: An economic condition where an increase in revenue from natural resources leads to a decline in other sectors of the economy, such as manufacturing, due to currency appreciation.

Environmental Degradation: The deterioration of the environment through depletion of resources, destruction of ecosystems, and pollution often associated with extractive industries.

Authoritarianism: A political system characterized by concentrated power in a leader or an elite not accountable to the public, which can emerge in resource-rich countries that rely heavily on resource revenues.