How does the resource curse affect democracy?
The resource curse, also known as the paradox of plenty or the poverty paradox, is the phenomenon of countries with an abundance of natural resources (such as fossil fuels and certain minerals) having less economic growth, less democracy, or worse development outcomes than countries with fewer natural resources.
Who coined the term resource curse?
The British economist Richard Auty coined the term “resource curse” in a 1993 book investigating why resource-rich countries under-performed other developing economies.
How do I get rid of resource curse?
Untangling the link between violence and resource wealth
- Large windfalls of politically controlled natural resource revenues encourage violence.
- Elected local governments are more successful than appointed governments in discouraging violence.
How can resource curse be explained?
The resource curse, or resource trap, is a paradoxical situation in which countries with an abundance of non-renewable natural resources experience stagnant economic growth or even economic contraction. At times, the resource curse can also result from government corruption.
How did Chile avoid the resource curse?
Chile coped with abundant copper reserves by developing proper institutions and diversifying foreign trade. Chile was successfully in using copper revenues to invest outside of the economy, under stable fiscal rules, while also diversifying its exports. Policies like these made the difference in economic outcomes.
How did Botswana avoided the resource curse?
Botswana, however, avoided the negative effects of commodity price volatility by saving the revenue made from diamond mining. Botswana established the Public Service Debt Management Fund and the Revenue Stabilization Fund, which provided the government revenue from diamonds over time, instead of all at once.
Is resource curse inevitable?
The resource curse is not inevitable, and several countries that have natural resource wealth do not exhibit many of these tendencies. That said, some studies have shown that low-income countries are more vulnerable to resource curse challenges.
How did Botswana overcome the resource curse?
While resource abundance may increase corruption for many developing countries, Botswana benefited from leadership, and accountability that made corrupt practices unwelcome. Saving revenues over time and investing it in future development are proven ways to break the natural resource curse.
Which countries have escaped the resource curse?
Four Countries that beat the resource curse
- Canada. When it comes to natural resources, Canada is a powerhouse.
- Chile. The Chilean economy has long benefited from rich mineral deposits in key areas of the country.
- Norway.
- Botswana.
How are natural resources related to the resource curse?
The hypothetical concept of natural resources diminishing potential economic development is widely referred to as the resource curse. The “curse” is that an over-reliance on a natural resource can bring many economic and political consequences. The causal mechanisms supporting this claim are actually quite simple.
Is the resource curse the same as the lottery?
While “the lottery analogy has value but also has shortcomings”, many observers have likened the resource curse to the difficulties that befall lottery winners who struggle to manage the complex side-effects of newfound wealth.
How is the resource curse a paradox of Plenty?
Resource curse. The resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of natural resources (such as fossil fuels and certain minerals ), tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources.
Why is the Netherlands considered a resource curse?
All of these countries are considered “resource-cursed”. Dutch disease makes tradable goods less competitive in world markets. Absent currency manipulation or a currency peg, appreciation of the currency can damage other sectors, leading to a compensating unfavorable balance of trade.
