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dc.contributor.authorBrinkman, Bradley M.
dc.description95 p.en_US
dc.description.abstractThis Senior Individualized Project is essentially an exploration into the observation that many countries around the world today which possess a wealth of natural resource are plagued by severe economic and social development problems. From the oil abundant Middle East to mineral rich sub-Saharan Africa, many countries and regions seem to be poor and ridden with war and violence despite the enormous natural wealth in which they possess. However, a growing field of thought in economic and development literature proposes that many of these resource-dependent countries are poor not in spite of their resource wealth, but rather because of it. Natural resources are no longer thought of as an easy path to rapid development, but rather as a potential curse and an impediment to a developing nation's quest to obtain a higher level of economic prosperity and social well-being. Proponents of this resource curse theory offer both economic and political explanations for why resource wealth can retard developmental progress. Resource wealth or a boom in the world price of a country's leading resource export can distort economic incentives within the nation's economy. A resource abundant country will tend to specialize in the extraction and exportation of a booming resource at the expense of other more sustainable economic industries. This leads to a less diversified economy whose fate will rise and fall at the mercy of world commodity prices which lie beyond the realm of their power. Furthermore, nations experiencing a resource boom can be led to ruins by virtue of the inordinate amount of wealth they obtain in a short amount of time. An in-depth case analysis is provided of the spending bonanza which occurred in Venezuela following the oil booms of the 1970s and how a lack of fiscally responsible policies led to a disastrous debt crisis. From a political angle, an analysis of literature will reveal that resource wealth can lead to a higher probability of corruption in public institutions, as government officials are often tempted to dip into resource rents for private gain rather than the public interest. Even more devastating for the development of many nations, natural resources can prolong and intensify war and violence by funding rebel guerilla movements and securing the power of tyrannical autocrats. However, not all development experts support the claim that resource wealth is a cause of governmental failure. Other literature proposes that the quality of pre-existing institutions will determine how a country manages its resource wealth. Citing prominent counterexamples of highly developed nations which were once highly dependent on natural resources, such as the United States and Canada, many theorize that it is the quality of institutions which impact resource wealth rather than the other way around. To test these theories with real world data, a statistical analysis was performed to explore the relationship between natural resources and different measures of economic and social development. In the course of this project a small, yet statistically significant, negative correlation was found to exist between a nation's level of resource intensity and three different development indices: GDP per capita, the UN's Human Development Index, and the Corruption Perception Index tabulated by Transparency International. A fourth, the average annual growth rate of GDP from 1970 to 2003, was found to not have a statistically significant relationship. To use these findings and the economic theory behind them to definitively claim that natural resources are a universal curse to nations seeking a path towards development would, in my opinion, be a jump to a shaky conclusion. Natural resources can be used to promote economic growth, yet they must be managed in an efficient way to ensure that rents are reinvested to promote sustainable future development. Unfortunately, the resource curse seems to be such a prevalent phenomenon because many resource abundant countries have been plagued with poor political leadership and economic mismanagement. Therefore, while it would not be proper to definitively say that natural resources are undoubtedly a curse, I am confident to conclude in this SIP that resource wealth has undoubtedly not been the blessing that many in the developing world had previously hoped for.en_US
dc.relation.ispartofKalamazoo College Economics and Business Senior Individualized Projects Collection
dc.relation.ispartofseriesSenior Individualized Projects. Economics and Business.;
dc.rightsU.S. copyright laws protect this material. Commercial use or distribution of this material is not permitted without prior written permission of the copyright holder.
dc.titleThe Curse of Natural Resourcesen_US
KCollege.Access.ContactIf you are not a current Kalamazoo College student, faculty, or staff member, email to request access to this thesis.

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  • Economics and Business Senior Individualized Projects [1093]
    This collection includes Senior Individualized Projects (SIP's) completed in the Economics and Business Department. Abstracts are generally available to the public, but PDF files are available only to current Kalamazoo College students, faculty, and staff.

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