Definition (Encyclopedia of Global Resources)
The resource curse is the term used to describe the fact that countries with large endowments in resources have often tended to develop more slowly economically than countries with small endowments in resources. This behavior is the opposite of the expected, traditional view that abundant resources are an important aid in a country’s economic development.
(The entire section is 56 words.)
Overview (Encyclopedia of Global Resources)
That an abundance of resources is an important advantage for the economic development of a country has been widely believed. However, there is an opposing view based on the comparison of the rate of economic advancement for developing countries. The comparison shows that countries with large endowments of resources have tended to develop at slower economic rates than countries without such endowments in resources. This type of situation has become known as the “resource curse.” The resource curse is considered a particularly likely problem for a country that has a large endowment of a nonrenewable resource, like minerals or oil, that leads to an export-oriented industry that is large relative to the country’s domestic economy.
Several arguments are made to explain why the resource curse might happen. In general, exporting natural resource products is less desirable than manufactured products. Natural resources tend to have declining prices relative to manufactured goods over time, and natural resource markets are very volatile, with large swings up and down in prices. A second argument is that the presence of a large, export-oriented resource industry, often operated by foreign companies, can severely damage a country’s economy by taking workers (higher wages) from important domestic sectors and raising domestic prices (inflation). This is referred to as the “Dutch disease” after the impact of a large natural gas find on...
(The entire section is 419 words.)