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Avoiding the resource curse

By not extracting resources we can also avoid associated problems on a local scale. The so-called ‘resource curse’ is a well known problem also described as the ‘paradox of plenty’1–3. Data shows that many resource-rich countries often underperform economically compared to countries with fewer resources and also experience disproportionally higher levels of civil war.

The abundance of resources brings up governance challenges to often already-weak governments and governance systems especially as corruption is a common issue that constrains effective democracy. The strong reliance on the extractive sector furthermore hinders diversification and makes the economy highly dependent on world market commodity prices. Even in countries where there is no civil war or obvious macroeconomic problem, such as Ecuador and Peru, we see major conflicts arising at regional levels4,5. Arellano-Yanguasspeaks of a new type of resource curse where, for example, the current hunger for coal in Germany has led to huge environmental destruction in Colombia, even impacting agriculture and export of other goods5,6. Referring to a World Bank report, Temper et al argue:

In  calculating  ‘Adjusted  Net  Saving’  by  subtracting  some  of  the  damage done by resource degradation and pollution, most primary commodity producers have a net negative saving. Hence, the increased GDP benefits from extraction of fossil fuels are offset by the damage done in that same process. This fact has been  acknowledged  in  the  2011  World  Bank  book,  The  Changing  Wealth  of Nations, and in some cases, such as with Sub-Saharan Africa taken as a whole, by  2008  net  negative  savings  reached  7%  of  Gross  National  Income.7

In other words, by leaving natural resources underground, the people of Sub-Saharan Africa would have been much wealthier than under circumstances generated by the contemporary Resource Curse.7

For more literature on resource curse and  information on the impact of extraction using the example of Ecuador please click on the topics.



[1]  Bannon, I. and Collier, P. (2003), "Natural Resource and Conflict: What We Can Do", in: Bannon, I. and Collier, P. (eds) Natural resources and violent conflict: Options and actions. World Bank, Washington, D.C, pp. 1–16.

[2]  Sachs, J. and Warner, A. (1995), "Natural Resource Abundance and Economic Growth", NBER Working Paper Series, No 5398.

[3]  Mac Ginty, R. and Williams, A. (2009), "Conflict and development", London, New York: Routledge.

[4]  Bebbington, A. et al (2008), "Contention and Ambiguity: Mining and the Possibilities of Development", Development and Change,Vol. 39, No 6, pp. 887–914. Abstract available at: http://onlinelibrary.wiley.com/doi/10.1111/j.1467-7660.2008.00517.x/abstract

[5]  Arellano-Yanguas, J. (2008), "A Thoroughly Modern Resource Curse? The New Natural Resource Policy Agenda and the Mining Revival in Peru", IDS Working Paper 300.

[6]  Ristau, O. (2014), "Gefährlicher Kohlestaub in Kolumbien", Deutsche Welle, 13.04.2014. 

[7]  Temper, L. et al (2013), “Towards a Post-Oil Civilization. Yaunization and other initiatives to leave fossil fuels under the soil”, EJOLT Report, No. 06.