Good Example Of The Natural Resource Curse: Origin, Implications And Solution Essay
Throughout history, there has been numerous numbers of civil wars all around the world. These conflicts resulted in hundreds of thousands, if not millions of casualties. These civil wars also led to grave impacts both on the government and its people. One side of the war may claim victory, but it is not victory at all when all resources have been exhausted, when there’s no one else to celebrate the victory with.
According to the article entitled, “The Natural Resource Curse: How Wealth Can Make You Poor” written by Michael Ross, most conflicts are resource-related. The title of the article seems very ironic. How can resources, or wealth, make you poor? And, is there really such thing as a natural resource curse? This paper will focus on the origin of the natural resource curse and also how a country could acquire such a curse. Furthermore, this paper will discuss a view on the solutions presented by Michael Ross in the previously mentioned article.
First, the natural resources involved should be defined. These natural resources can be oil, gemstones and minerals. These natural resources are more often considered as an advantage to the country. For a natural resource can sometimes last for decades giving the country a chance to grow, economically. But there is a disadvantage of having large amounts of these resources. This is the basis of the term ‘natural resource curse’. The natural resource curse is an observation wherein countries with an abundance of these resources decline in terms of performance . This observation is not merely a statement but is supported by studies through the help of econometric tests of economic performance determinants of a handful of countries . From 1990-2002, there were 17 civil wars that can be linked to resource wealth. Eight out of 17 conflicts involved gemstones as a resource; six out of 17 involved oil but in most of the conflicts, multiple resources are involved .
Although the natural resource curse has been evident in some past civil wars, it would take a larger amount of data to further examine the cause of this curse. This means the collection of data of cross-country measurements and specifications, as well as identification problems. But this method fails in a way that a consensus or a general agreement of a group has proved elusive (Caselli and Cunningham). A better way to address the natural resource curse is to identify instances wherein the natural resources, its handling, processing, its market and where the profit goes, affect the government and people of a country. Even if the focus is natural resources, it is important to point out that natural resources are not the sole cause of a conflict. These conflicts are caused by poverty, religious grievances as well as unstable governments. Furthermore, it is also important to point out that never does natural resource dependence makes serious conflicts inevitable. Countries with large amount of natural resources, do try to avoid violent conflicts .
In his article, Ross presents four pathways to understand further how natural resources fuel civil wars and serious conflicts. To further analyze how natural resources often lead to conflicts like civil wars, it is better to dissect the effects of these resources in the economy of a country, its effects on the government, its effects on the people located in resource-rich areas and lastly, its effects on the movements of rebels. It is also important to take note that these civil wars are often driven by how the resources are mismanaged. But then, when the war is won, it is very likely that these resources will again be mismanaged by whoever wins the war due to the fact that is has to be shared widely (Caselli and Cunningham).
As it was pointed out earlier, countries that have high dependence on natural resources are more likely to experience civil wars. This happens because of two main economic effects. First is economic growth reduction and second, is the increase in poverty. Ironically, having an abundance of natural resources can lead to economic distress. This irony can be explained by a report of World Bank on the economic performance of the mining sectors of countries in the 1990’s. From the report, countries which employ mining sectors of medium size experienced a decrease in GDP per capita at a 0.7 percent per year rate. Countries that employ large mining companies experienced a drop in their GDP per capita at a rate of 1.1 percent a year and in countries with even larger mining sectors, the drop even reached a rate of 2.3 percent a year. This further leads to the fact that a negative growth rate can be the cause of civil wars as suggested by recent studies. On the other hand, countries with high dependence on natural resources tend to neglect its citizens when it comes to education and health services. This alone, creates a spark and fuels a rebel movement . If for example, in an area where oil, or any other natural resources are extracted, experience the same dilemma, they could easily form a group to oppose the extraction of natural resources. The fact that they are high in number, have the same sentiments, and live close enough to each other, strengthens the upcoming rebel movement.
Ross suggests two types of measure that would alleviate or aid economies with high natural resources. The first measure is to employ trade liberalization in promoting diversification. Diverse exports protect, if not exempt a country from the fluctuations of the international market. Therefore, making them deviate towards the natural resource curse. The OECD states or Organization for Economic Co-operation and Development states could help countries that are highly dependent on natural resources to diversify by removing the nontariff and tariff barriers to goods that are value added. The second type of measure is to come up with better ways to reduce or decrease revenue volatility. This basically means that if a country becomes more dependent on its natural resources, like oils and mineral exports, they become more vulnerable and affected by economic shocks. And as studies suggest, these economic shocks promote corruption as well as weaken state institutions. Moreover, it is important for government institutions to find better alternatives in managing revenue flows.
Having a steady influx of profit from natural resources makes a government less able in resolving conflicts thereby resulting to less diplomatic measures in resolving the conflicts. This often occurs in three mechanisms namely corruption, state weakness as well as reduced accountability .
Corruption usually occurs when there is a very large amount of money coming because of high volume of natural resources, governments lose track on how their revenues are managed. This is because, more often than not, these types of government could only manage so much let alone track them. Moreover, there are two ways in which a government can be weakened. First is to weaken territorial control. This comes from how the natural resources are being managed. If the natural resources being employed by a country can be easily extracted and processed by locals without any long term training, the government will soon lose its control over that area. It is definitely easier to control a single large processing site than hundreds of them. The second way, weakening the government’s bureaucracy, further proves that the negligence of a government to its people will later on result to a group of people, even an army, trying to overthrow the government. Lastly, a decrease in the accountability of a government results leads to mismanaging the revenues. Usually, military gains control of the natural resources companies by collecting fees. This way, the revenue goes straight to military budget without any consent from the government. This exempts the military from any legislature which serves to weaken the government’s idea of democracy. Less democratic governments, again, are less able to solve conflicts and grievances experienced by its citizen .
A government’s purpose is to not only provide for the country but also to provide for its people. A government that depends not on the taxes of its people but on other revenues such as natural resources can easily lose its hold on the activities of its people. This would later on lead to violent conflicts that actually would strike a blow on both sides. To impose a war, it must be funded. This is where the cycle starts. The conflict starts with mismanagement of resources but then, when the war or argument is won, the management of resources again becomes an issue. For these types of government, transparency has to be ensured in line with responsible spending.
Canuto, Otaviano and Matheus Cavallari. "Natural Capital and the Resource Curse." Economic Premise May 2012.
Caselli, Francesco and Tom Cunningham. "Leader behaviour and the natural resource curse." Oxford Economic Papers (2009): 628-650.
Caselli, Francesco. "Power Struggles and the Natural Resource Curse." (2005).
Franknel, Jeffrey. "The Natural Resouce Curse: A Survey." (n.d.).
Ross, Michael. "The Natural Resource Course: How Wealth Can Make You Poor." Bannon, Ian and Paul Collier. Natural Resources and Violent Conflicts. Washington, DC: The International Bank for Reconstruction and Development, 2013. 17-42.
Sachs, Jeffrey D. and Andrew M. Warner. "The Curse of Natural Resources." Elsevier (2001).
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