Let's consider the idea of a natural resource curse.
That's the notion that a country and its citizens may be worse off
because that country has more natural resources.
But is that true?
Just to take some simple examples,
if you look at the nations which have the richest resources per citizen,
those are Australia, Canada, New Zealand, and Norway.
Of course, they're all doing pretty well.
If you look at the two nations which have the poorest resources per citizen,
well, those two are Jordan and Malawi.
And Jordan is a middle-income country,
Malawi is one of the poorest nations on earth.
It's in central Africa, it's landlocked,
they still have famines there.
So this contrast indicates the natural resource curse,
at least, isn't going to be true in any very simple way.
When you look at the data overall,
there are a number of ways you can show the numbers
that would appear to indicate some kind of natural resource curse.
For instance, in this diagram on the vertical axis,
there is GDP growth, and on the horizontal axis,
there is primary exports as a share of GDP as of 1970,
and you can see there is some negative relationship.
That said, it's not a strong negative relationship.
There's an awful lot of scatter in this graph,
and it could be that the notion of a natural resource curse, overall,
is concealing more information than it's revealing.
This diagram comes originally from some work by Sachs and Warner,
and you'll find a good discussion of it in a paper by Manzano and Rigobon.
Even if you don't think there's a natural resource curse,
perhaps it's at the very least surprising that having more natural resources
doesn't seem to be good for a country's rate of economic growth.
So, more generally, what are some of the economic problems
with having natural resources?
One is simply that, in some historical eras,
resource prices tend to be falling.
This was especially the case for the 30 to 40 years after World War Two.
So if resource-rich nations had a poor growth performance in this period,
it could simply have been the price pattern
rather than any deeper truth about having natural resources.
Another factor commonly cited is that, in terms of productivity,
resources may be dead-end sectors of a sort.
That is, if you have some lucrative oil wells in your country,
well, you learn how to pump oil,
but it doesn't have much spillover into doing other things well,
it doesn't encourage a lot of your population to become educated.
It may just be what is sometimes called a dead-end sector.
Another factor is simply that resource prices are often cyclical and volatile,
and they're heavily influenced by the state of the world economy,
and that cyclicality or volatility may stop the resource-wealthy nation
from being able to predict and control its environment
and grow around the resource.
Resources also may be highly susceptible to control by elites.
It's pretty easy to imagine a totalitarian state or a dictatorship
learning how to pump oil out of the ground.
It's harder to imagine those same governments, say,
learning how to run Silicon Valley.
So that means that if you have a lot of resource wealth,
perhaps in the form of oil,
that will encourage your government to be less democratic
and less publicly inclusive.
Finally, resources may encourage armed conflict
because other countries may wish to attack yours
to take control of the resources.
For instance, consider the diamond wars in Sierra Leone.
In that case, it was a civil war.
If we consider Saddam Hussein's invasion of Kuwait,
well, quite possibly he wouldn't have done it
had he not had a chance of getting a hold of the oil.
I'm very much persuaded by the work
that shows to the extent there is a resource curse.
For the most part, it appears to boil down to oil
and also nationalized oil sectors.
So if we take the countries which are wealthy in oil,
since 1980, they have overall become less democratic
even though the world, as a whole, has become much more democratic
over that same time span.
The oil-producing countries, controlling for other factors,
also have governments which are about 50% larger
than the non-oil-producing countries.
Having a lot of oil for more countries
does seem to bring more corruption and more centralized control.
There's also good evidence that oil-rich countries,
again controlling for other factors,
have a much greater amount of gender inequality.
For all these reasons, having more oil may indeed be a curse
even though, perhaps, there's not a natural resource curse more generally.
To the extent there is a natural resource curse,
there are things countries can do to protect themselves
against those problems.
For instance, when revenue is high,
they should save up and invest those surpluses
as Chile has done with its copper revenue.
The price of copper is indeed quite cyclical,
but when the price of copper is low,
rather than that meaning bad times for Chile,
they can draw upon their stored revenue.
Transparency of revenue is another good idea
basically to limit corruption and to make sure that the money,
which comes in from natural resources, is spent on something useful
rather than just being siphoned off by a country's leaders.
There are many interesting articles and books on this topic.
A key early piece is by Jeff Sachs and Andrew Warner.
That's called 'Natural Resource Abundance and Economic Growth'.
The Jeffrey Frankel piece listed is an excellent survey of the entire topic.
The short Charles Kenny piece, 'What Resource Curse?'
tries to debunk the idea of a natural resource curse.
The work by Michael Ross, his book, 'The Oil Curse'
and his article on political economy give an excellent sense of how
the natural resource curse may interact with politics.
And finally, there's a very good article by Manzano and Rigobon,
'Resource Curse or Debt Overhang'.