More often, nations endowed with non-renewable natural resources find themselves at a crossroad of opportunities and challenges. This implies that the presence of the natural resource presents numerous opportunities to be exploited but at the same time challenges arise. When used well and responsibly, these resources can have great positive impact on the economies of such countries as well as the quality and standard of lives of the citizens of the countries. However, more often than not, the existence of these resources, mostly in less developed nations, normally leave these nations in poor and sorry state instead of prosperity. A situation termed as ‘resource curse’. By definition, resource curse, also called the paradox of plenty, refers to a situation where countries endowed with a natural resource curse tend to record slow economic growth as compared to countries with fewer natural resources. Instead of benefiting and prospering the country and its citizen, the extraction of the natural resource causes significant and serious problems.Global history is full of illustrations of countries like Sudan, Nigeria, Angola and Netherlands whose natural-resource wealth resource curse in form of conflict, corruption, and poverty.
Causes Of The Resource Curse
Corruption: Corruption is one of the key causes of a resource curse. the process of mining and extraction of the natural resources is bedeviled with corruption right from the point of discovery of the resources to extraction and sale of the products. Officials of the mining companies bribe government officials in order to get protected from competitors. Additionally, revenue gained from the extraction of minerals is embezzled by governments, leaders of governments and sometimes even by individuals and corporations from foreign nations.
Poor governance: In countries where the paradox of plenty was experienced, poor governance was a major contributing factor. Governments of such countries were accused of poorly managing the wealth that emanated from the exploitation of the resources. Such governments relied heavily on revenue raised from such natural resources instead of investing and concentrating on in other sectors of their economies.
Lack of transparency: Conspiracy between governments and the resource mining companies to hide details of contracts signed between the parties has also been established as a promoter of the resource curse. When the details of contractual agreements are made secrets and hidden from other critical stakeholders like the general public, it provides opportunities for corruption and embezzlement of funds. Moreover, it becomes difficult to hold the government accountable.
Effects Of The Resource Curse
There are numerous effects of the resource curse. These include; Dutch disease and civil war.
Dutch disease: This is a phrase used to refer to the challenges and adversities that Netherlands went through when it discovered North Sea gas. The result was stronger Dutch currency, poor performance of other sectors and industries, and volatility of commodity prices.
Civil war: Resource curse can lead to civil war. This is what has been experienced in countries like Sudan and South Sudan. This could be due to scramble for the resources and poor distribution of resources.
Preventing/Reversing Resource Curse
There are measures that governments and international communities can take to prevent or reverse the negative effects of the resource curse. Diversification of the countries’ economies, transparency: disclosure, accountable government institutions, tackling corruption, and equitable distribution could help reverse the resource curse.