Africa: How Do We Reverse the Resource Curse?

analysis

Scholar Richard Auty first coined the phrase 'resource curse' in 1993 to illustrate the confounding nature of the relationship between natural resource abundance and under-development. Intuitively we expect that natural resources would provide the bedrock for development. To the contrary, empirical evidence suggests a strong correlation between natural resource wealth and poor development outcomes, at least since the early 1970s. For instance, where resource dependency - the proportion of a country's resource exports as a proportion of total imports - is high, the curse abounds: Corruption; widespread poverty; a lack of human development; undermined media freedom; premature de-industrialisation; civil war and authoritarian rule are among some of the key manifestations.

Analytically, it is of course impossible that resources in themselves - by some kind of geographic predestination - are responsible for under-development. What determines catastrophic outcomes is how resource rents are acquired and distributed in any given political economy context. In other words, institutions matter. Institutions are the social systems - beliefs, norms, culture and values - that motivate regular human behaviour. If institutional constraints on the exercise of elite power are strong, resource wealth can be harnessed for the benefit of citizens. Norway, with long experience in managing its petroleum resources in a way that promotes sustainable economic growth and Norwegian welfare, is the oft-used example. In the absence of such constraints, however, elites tend to appropriate resource wealth to cement the bargain at the heart of their ruling coalition. This is why oil wealth tends to correlate with authoritarian rule, which has its own set of anti-development dynamics.

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