The political economy of the resource curse : a literature survey

This paper presents a critical survey of the literature on the ‘resource curse’, focusing on three main questions: (i) are natural resources bad for development?; (ii) what causes the resource curse?; and, (iii) how can the resource curse be overcome? In respect of these questions, three observations are made. First, while the literature provides considerable evidence that natural resource abundance is associated with various negative development outcomes, this evidence is by no means conclusive. Second, existing explanations for the resource curse do not adequately account for the role of social forces or external political and economic environments in shaping development outcomes in resource abundant countries, nor for the fact that, while most resource abundant countries have performed poorly in developmental terms, a few have done quite well. Finally, recommendations for overcoming the resource curse have not generally taken into account the issue of political feasibility. More generally, it is argued that the basic problem with the literature is that researchers have been too reductionist – they have tended to explain development performance solely in terms of the size and nature of countries’ natural resource endowments. A consensus is emerging that various political and social variables mediate the relationship between natural resource wealth and development outcomes. But rather than acknowledge that these variables are shaped by a range of historical and other factors in each case, scholars have tended to see them as determined by the natural resource base. Put differently, scholars have been asking the wrong question: rather than asking why natural resource wealth has fostered various political pathologies and in turn promoted poor development performance, they should have been asking what political and social factors enable some resource abundant countries to utilise their natural resources to promote development and prevent other resource abundant countries from doing the same. Keywords: natural resources; civil war; democracy; economic growth