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Can Countries Be Cursed?: Resource Curse - Büşra Selin Kartal

In many countries rich in natural resources worldwide, it has been seen that democracy does not have a good place, like in Central Asia, the Middle East, Africa, and Latin American countries. Moreover, in some cases, it has been observed that these countries do not have the economic development to be expected from abundant natural resource reserves. The term "Resource Curse," which is put forward by observing the opposite effect of natural resources and economic development in the literature, can be explained as the negative effects of the abundance of natural resources (especially energy resources such as oil and natural gas) on the economic, social and political conditions of the countries, contrary to what is expected. The Rentier States, where external rents largely provide the states' revenues, constitute the majority of the countries that experience this situation. Countries experiencing Resource Curse do not need to develop a secondary sector as an alternative while generating their revenues mostly with rents from natural resources. For this reason, education and R&D studies that will feed other sectors are not given the necessary importance.

As well as many reasons that make up the Resource Curse, such as poor resource management of states, corruption, unequal distribution of resources and foreign intervention, this curse can be devastating for a country. The primary result is not being able to develop sufficiently and economically while having a chance of resource excess. Among the OPEC countries, which have almost 80% of the world's oil reserves, there is not a single country among the top 10 countries with the highest GDP. Also, the GDP growth of these countries has not been observed in a ratio that is expected. When the GDP Annual Growth Rate is examined, none of these countries are among the top 10 countries. The situation is even worse when other resource-rich countries are studied, except oil-rich OPEC countries. For example, the economic indicators of Central Asian countries that have developed close relations with Russia and China are far behind (Even though they have shown improvement in economic growth recently). Of course, these data are not enough to indicate that these countries are completely underdeveloped. Perhaps the equality of income distribution in the country may come to mind. In other words, despite the lack of high GDP data, it can be thought that these countries, whose economies are mostly based on natural resources and related sectors, offer welfare to their people by distributing incomes equally. Looking at the Gini coefficients, which measure income equality, of OPEC countries, it can be said that some of them perform well according to the latest data (Especially SA and UAE).

While income equality may sound good, it can be used by autocratic regimes to maintain the status quo. While public discontent arising from income inequality can be a driving force for democratization movements, the fact that the majority of the people have high and, respectively, equal incomes brings satisfaction to the regime, even if it is autocratic. In addition, the absence of the need for taxes to be collected from the public for government expenditures—more common in cases of expropriation of resources—makes government representation and responsibility unnecessary, and the regime does not feel compelled to take action to ensure legitimacy. As a result of breaking this economic bond between the people and the rulers, democratic institutions can't be established, and even if they are established, they can't function properly. The most important of these institutions, the lack of development or weakness of civil society, is a major factor in the failure of democracy. In support of this claim, none of the North African, Middle East, and Central Asian countries has full-democratic governments (most of them are classified as authoritarian). This situation is the same in Latin American countries. (While Uruguay and Costa Rica are exceptions, the natural resources of these countries do not have a large share in their GDP.) In addition, most underdeveloped resource-rich countries are not classified as free in terms of political rights and civil liberties.

So is this a dead-end, or are there ways to get rid of it? Of course, not all natural resource-rich countries have suffered from this curse. For example, Canada, the US, and Scandinavian countries like Norway are both democratized and show a high economic development. In addition, there are countries such as Russia and China which are developed in the economy but are highly problematic in terms of democracy. When the resource management of these countries and the policies they apply to avoid the curse are examined, some ways can be suggested for countries that want to democratize and develop their economies. First of all, these countries need to change their economic policies drastically. Many international organizations- World Bank, UN Development Program, Extractive Industries Transparency Initiative, and Kimberley Process Certification Scheme- have started programs to help countries that want to eliminate this situation by creating better resource management. Another way would be to increase sectoral distribution and ensure economic diversity to not collect all economic activities in a single sector and not be dependent on resources. In this way, the country's economy will be less affected by fluctuations in resource prices. At the same time, diversity in the sector will also create an opportunity for democratization (Such as strengthening unions, organizing different occupational groups, diversifying the demands and needs of the government, etc.). Even though they are rich in energy resources, they also need to diversify the energy sector. Another method is to set up funds for natural resource revenues, with the example of Norway. The country established the Government Pension Fund Global, officially named after a large amount of oil discovered in the Norwegian North Sea. This fund, which aims to protect its economy from fluctuations in oil, also aims to benefit future generations from the income by providing long-term savings. In this way, income is evaluated as an investment tool without being used for luxury and excessive spending. Another important point to overcome the curse is to control the distribution of income to the population. It is important to prevent the income from spreading to a single group. In some cases, it will be a good choice to engage in the capitalist economy instead of nationalizing the resource. This way also allows individuals to have a say in the administration.

There is very rich literature on countries' economic development and democratization, so these paths can be diversified. It is important for their citizens and the entire international community that resource-rich countries provide economic development and, if possible, in democratic ways. In this way, countries will be able to achieve long-term sustainable economies, not short-term economic developments. At the same time, both the citizens and the next generation will benefit from natural resources, which is a chance.


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