Curse or blessing? : challenges of commodity-based economies

Abstract

The idea that massive natural resource endowments would lead countries to weak economic growth and development is counterintuitive. Oil, gas, copper, gold or other resource riches should, at least in theory, spearhead countries with such natural wealth to growth that parallels non-commodity-based economies and help them achieve high-income status. This has not been the case for majority of the endowed countries particularly in North Africa, the Middle East and Latin America. With few exceptions, such as Norway, Botswana, Chile or Australia, the resources proved to be a curse. I begin with a survey of previous academic literature and research on the effects of natural resources on a given country's economic, social and political development. I then move to exploring the many challenges and pitfalls faced by resource-based economies. Such concepts as the Dutch Disease, Rentier State, Governance and Corruption are discussed. In the final section, outline different methods of the resource curse management by first exploring monetary and fiscal policies, and later touching upon the issues of responsible governance. I conclude by proposing a multi-step framework for resource management.