The way in which the ‘resource curse’ affects countries’ political development is a topic of some debate. This article provides a review of a selection of academic articles relating to the political effects of the ‘resource curse’. Further reading suggestions are provided in the references given below the article.
In his investigation into the effect of oil on democracy Ross (2001) outlines a number of ways in which natural resources can influence political outcomes, Busby et al (2005) use three of them to show why governments with resource wealth may not implement policies beneficial to the economy.
First, rentier effects; when a state can generate large revenues from relatively few easily controlled resources they do not have to rely on taxation to fund government spending, therefore citizens have less incentive to develop effective methods of scrutiny to make sure government money is being spent effectively; it may be easier for the government to violently suppress opposition or to buy compliance from opponents rather than through provision of decent public services.
Secondly, states which control abundant natural resources may resist industrialisation as likely to lead to the rise of middle classes and new elites which may want to loosen the hold over the resources of the current elites, this is called delayed modernisation. States which control natural resources may also be entirely dependent on foreign skilled labour to provide the knowledge required to extract the resources. This means that there is no economic imperative to provide a skilled, well educated workforce, without this education citizens are less able to voice their interests and push for better, more efficient use of their countries natural resources.
Third, entrenched inequality relates to the way in which the method of production or extraction of natural resources has influenced the political development of a country. Busby et al. contrast North and South America. In North America the resource wealth comes from easily available land producing crops such as wheat and corn, this has produced an economy made up of a collection of smallholders on individually owned plots. In South America, natural resources such as sugar and coffee are grown on large plantations owned by one family employing large numbers of unskilled labourers. In the South American context large landowners were able to consolidate power and resist democratic reforms leading to bad governance less concerned with the development of the whole economy and more concerned with maintaining the power of a few large landowners. Busby et al. seem to be arguing that the effects of natural resources on an economy depends on the characteristics of the natural resources, resources such as oil lend themselves to large oligopolistic producers to take advantage of technology and scale economies. Point source natural resources extracted from a narrow economic or geographical base provide conditions detrimental to the formation of effective institutions, as they are easier for the elites to control and therefore each of the effects described above are made more likely to occur. Evidence in support of this can be seen in appendix A which shows the median annual growth rate of GDP per capita for 90 developing economies in 1985 classified by their export structure. Natural resource exporters experienced considerable slowdowns, but the slowdown was more extreme and lasted longer for point source and coffee or cocoa exporters than for countries whose principal exports were diffuse. Birdsall and Subramanian (2004) add that when considering the effect of the resource curse on institutions it is helpful to consider economic rents rather than revenues. Natural resources which require large amounts of effort or investment to produce, such as agricultural crops in the example of North and South America above, will be less conducive to the resource curse. Easily extracted natural resources such as gas, oil and minerals are most likely to cause negative effects.
Ross (2001). Does Oil Hinder Democracy? World Politics 53(3):325–61
Busby, G., Isham, J., Pritchett, L. and Woolcock, M. (2005) The Varieties of Resource Experience: Natural Resource Export Structures and the Political Economy of Economic Growth, The World Bank Economic Review, 19: 141 174
Birdsall, N. and Subramanian, A. (2004) Saving Iraq from its oil, Foreign Affairs, 83, 4
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