Research Paper on "Natural Resource Curse"

Research Paper 7 pages (2297 words) Sources: 5

[EXCERPT] . . . .

Natural Resource Curse

Several observations made in various countries rich in natural resources show that most of these countries perform poorly economically (Fidel 31). The reports clearly indicate that it especially happens in developing nations. Every nation that has a natural resource has had a series of discrepancies during the initial stages of the discovery. These disagreements in some situations drag through for quite a long period leading to a tag of war over the resource. There are empirical evidences that clearly support the fact that so many countries that are poor still have plenty of natural resources. This is especially so in countries which fail to initiate resource directed development programs.

The evidences present support the observation that in all countries that have vast natural resource endowment rarely have high GDP (Fidel 46). There is no correlation between the amount of natural resources present in an economy and the natural wealth of the nation. Hence, this raises the question that, why do we not observe a positive correlation between these factors that should be darned parallel. For instance, the very rich in natural gas and oil states of Mexico, Nigeria and Venezuela have had issues attaining a sustained economic growth.

Moreover, repeated patterns of the slow economic growth are observed in several post war period countries that are rich in resources. Therefore, this then presents the question that, if the natural resource is not a curse to these nations, why is it causing so much suffering and inconsistencies in development? It is this scenario of countries, endowed with abundant natural resource wealth and yet they are failing to grow rapidly than those without these resources. This phenomenon is what is referred to as The Natural Resource Curse (Fidel 26).

In order to understand the resource curse better, it is imperative to examine the scenarios observed in many nations that suffer internal and some cases international conflicts. Since time immemorial, such civil wars have resulted from several factors, such as religious disagreements, ethnic differences and poverty. However, it is essential to note that all these causes of conflicts emanate from the central factor of natural resource access and control. The control of resources by governments and the vested interest parties is what results in the instability that we observe in these developing nations.

The natural resources that present the chief source of conflicts and retrogressive development pace are quite diverse (Haber, Stephen & Victor 17). The main resources include oil and natural gas deposits and wells and the hard-rock minerals. Such hard-rock minerals range from gold, diamonds, coltan and other additional precious gemstones. Other resources include land, timber and drugs which in some scenarios can be considered a natural resource. Statistics indicate that, over the past few decades, various civil conflicts have been witnessed all over the country. Majority of these conflicts is linked to natural resources, with a substantial share being related to precious gemstones, followed by natural gas and oil and the least factor being timber.

Taking some case study scenarios, there have been several such cases of conflicts. For instance, the country of Nigeria, this African nation is richly blessed with abundant oil in its wells. The nation has so much wealth (Haber, Stephen & Victor 48). It has deposits of oil that can generate enough income, and grow the economy of the nation and people to the standards of a first world country in a remarkably short time. However, it is horrifying to note that the country suffers massive economic lags. It is among the poorest in the African continent, with an exceptionally large population living below the poverty line. Since the discovery of oil, the percentage of the poor people has increased to almost 70% from the previous 30%. The discover y of this precious commodity should have been a blessing, but alas, the vice versa is true.

Another example of such a nation that is embroiled in the resource driven conflicts that retard the development and growth is Cote D'Ivore. This nation is rich in cocoa. However, it is because of the unequal distribution of wealth and opportunities that we observe the difference in the north and south parts of the nation (Haber, Stephen & Victor 69). The north did not benefit much from the opportunities brought by the natural resource hence feelings of segregation causing them to seek redress violently. The northern part, which also has small deposits of diamonds, has since been taken over by rebels. These use the diamonds to buy arms to fight the south part of the nation and the central government. Therefore, this resulted in a conflict that has led to the slow and lagging development progress within the richly blessed nation.

Moreover, countries like Sudan and Angola, just like Nigeria, they are rich in plenty of oil (Haber, Stephen & Victor 92). Amount of petroleum that these nations can produce can overwhelmingly serve all the nations of the African countries. However, these nations have failed to explore this god given commodity to their benefit. They remain among the poorest in the continent and awfully slow in developing despite having been so rich in terms of natural resources. The nations suffer because of the exceptionally rich endowments in natural resources.

Some examples of countries that came from 'the natural resource curse' to explore their potential are such as the Netherlands. This nation had plenty of natural gas. The gas was discovered in the late 1960s, by the Dutch nation. However, the nation deteriorated significantly in economic growth after discovering the tremendous, magic natural resource that could propel the economy to greater heights. This is what later came to be known as 'the Dutch disease'. This is because, after the gas discovery, though there were no conflicts witnessed, the export process boomed so fast (Petrovsky 35). This appreciated the currency of Dutch to levels dreadfully high, reducing the competitiveness of the currency in the exchange market. This caused the nation to appear as though the world exchange rate had appreciated. The result was massive dwindling in the economy of the Netherlands, hence the natural resource curse. Nevertheless, after sometime, the nation recovered from this massive blow due to the natural resource curse.

Moreover, a nation such as Botswana is rich in gold, nickel, diamonds and other precious gems. This extremely richly blessed nation was also in the verge of experiencing the natural resource curse. It had lots of wealth distributed evenly along the country. This created tension when the resources started being explored and exported to earn revenue. However, the nation's leadership, realizing the high price that the nation would pay if it allowed the economy to be affected by the blessing turned curse. They set policies that helped prevent the nation from going down this road.

It is also striking to note that, countries that do not have natural resources or a poorly endowed with such are progressing at such a speed in economic growth. This contrast just serves clearly to bring out the question, if the rich natural resource nations are not under a curse because of the resource, then what else could it be? Let us consider a few examples of nations that have terribly little if not none of the natural resources.

The East Asian nations are good examples of such, the nations of Japan, Singapore, Taiwan, Korea and Hong Kong (Petrovsky 55). These nations all apart from sharing the continent and some boundaries, they all have one other common factor. They are all located on bare rocky islands. They virtually have no precious commodity or any mineral or natural resource, yet they are all among the fastest stable growing economies in the world. The conspicuous china, Korea and Thailand are high in terms of their economic growth, yet they do not possess natural resources. This is phenomenal considering their lack of resources. These are just but a few of the nations that are not blessed with any natural resources.

Therefore, in comparison of the nations with plenty of natural resource and those that do not have even a drop of the natural resource, it is clear that the resources are more of the reason why the nations' economies are performing so poorly. The economic evidences clearly show that this could be nothing else other than being a curse to these nations.

Reviewing the reasons why these natural resources pose as a curse to the nations is vital. The possession of natural resources does not always spell blessings to the nation (Petrovsky 73). The first reason why this natural resource can turn a curse is as seen in the 'The Dutch Disease' scenario. The discovery and exploration of a natural resource can cause the prices of commodities to fluctuate depending on the export rate and changes in the world markets. Hence, if the cases of trade are at the extremes, the economy of the country dependent on the natural resource trade can be retarded significantly.

Secondly, the discovery of natural resources diverge the attention of… READ MORE

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