News - October 29, 2009

Natural resources not a curse for developing countries

Dependency on natural resources does not lead to armed conflicts, as claimed by a group of economists. The 'resource curse' is a misnomer, says Wageningen economist Erwin Bulte. According to him, conflicts are more the result of weak governments. A shortage of natural resources, however, can stir up a conflict.

Rational predators
Countries whose economies are heavily dependent on primary raw materials such as oil, wood and minerals are more prone to civil wars, undemocratic regimes and slower economic growth. This controversial theory has been maintained in many studies by economists and political scientists in the past decade. Rebel leaders are considered to be 'rational predators' - they plunder diamonds, oil and mineral raw materials to enrich themselves and to attain power. According to this group of economists, natural resources are not only the source of conflicts, they also prolong the conflicts.
Bulte, professor of the Development Economics Group, and his Swiss colleague Christa Brunnschweiler subjected this theory to a research analysis in de Oxford Economic Papers. They argued that weak governments, in particular, play a major role in conflicts. Weak governments provide hardly any employment and public goods. This leads to resentment among the population and to armed conflicts. Better governments use exports of natural resources to develop the economy, thus raising the income of the population, which in fact lessens armed conflicts.
Via a mathematical equation, in which the factors of armed conflicts are quantified, Bulte and Brunnschweiler discovered that dependency on natural resources is not the cause of conflicts. Instead, they came up with something else. Countries with a history of civil war are much more dependent on natural resources. A conflict hardly affects the extraction of natural resources, but does affect the rest of the economy, such as manufacturing. Conflicts therefore lead to a bigger dependency on natural resources, and not the other way round.
The economists also found indications that resource scarcity can stir up a conflict. Scarcity leads to marginalization and resentment from the population, and revolt takes place sooner.
In their analysis, the duo makes an exception for diamonds, which are not included in the list of natural resources used in their equation. It is possible that diamonds are the reason - as in the civil wars in Angola and Sierra Leone - that conflicts are prolonged, add Bulte and Brunnschweiler.
The full article can be found here.