Whether or not natural resource abundance is a blessing or a curse is a common essay and examination topic for development studies. This article outlines some useful third world case studies to consider when outlining the arguments surrounding the topic. These examples are designed purely to point you in the direction of articles I found useful and should not be copied verbatim (see references).
Botswana has 40% of GDP stemming from diamonds, is landlocked and has a predominantly tropical climate; all factors that by destiny could be assumed to make Botswana susceptible to the resource curse. However, it has actually sustained the highest rate of per capita growth in the world for the last 35 years (Acemoglu et al, 2002). Acemoglu et al. suggest this economic success reflects the strength of the institutions in the country which have protected the property rights of investors, provided political stability, constrained the elites within a strong political system, and ensured the political participation of a broad cross section of society. Acemoglu et al. argue that the strength of Botswana’s institutions can be explained with reference to the country’s history. Botswana traditionally had tribal institutions which encouraged broad participation and restraint of elites, the peripheral status of Botswana in the British Empire meant that these tribal structures were not totally obliterated by the colonial structures.
It is possible to contrast Botswana, a country with traditional institutions able to overcome the resource curse, with Somalia where the traditional institutions are not sufficient to maintain political stability (Acemoglu et al. 2002). Again, British colonial rule had limited effect on the structure on the Somali society. Although its economy is dominated by agriculture and so is not subject to the same resource curse as Botswana it illustrates the effect on an economy of having weak institutions, we could possibly assume that conditions in Somalia would be even worse if it did have a natural resource abundance. Somalia’s industrial sector, based on processing agricultural products, has mostly been looted and sold as scrap metal, it has no effective national government, and conflict is common (CIA Factbook). Clapham (1986) writes that Somali society was traditionally nomadic with intense conflict over available resources. These pre-existing tribal foundations to Somali society provide an unsuitable basis for government in which allocation of resources can occur without ethnic and cultural conflict.
Collier (2007) uses Nigeria as an example of the benefits of institutions providing checks and balances on the distribution of resource rents. Nigeria is without doubt cursed with resource abundance. Oil provides 95% of its foreign exchange earnings, since independence in 1960 it has experienced military and civilian rule, has strong religious and ethnic tensions, and recent elections have been marred with violence (CIA Factbook). It is not an example of what can happen when all conditions are right but shows the benefits from institutional development. In 1998 Nigeria returned to civilian rule, the first term of the new government was one in which there was massive corruption, checks and balances did not exist as there had been no time to introduce them and powerful interests were opposed to them. Publicly funded projects provided opportunities for those in power to profit and raise funds with which to buy electoral support. However, at the start of his second term the president strengthened institutions to provide basic checks and balances such as competitive tendering for public projects, public contracts were recalled and put out to tender, the costs were reduced by an average of 40%. This shows the improvement that can be made with strengthened institutions.
Acemoglu, D., Johnson, S. and Robinson, J. (2002) An African Success Story: Botswana, CEPR Discussion Paper.
Clapham, C. (1986) The Horn of Africa, in Peter Duignan and Robert H. Jackson eds. Politics and Government in African States 1960-1985, Croon Helm, London.
Collier, P. (2007) The Bottom Billion: Why the poorest countries are failing and what can be done about it, Oxford, Oxford University Press