Resource curse

Resource wealth should make countries richer. Yet many resource-rich states have grown slowly, suffered civil war, or remained under authoritarian rule. The resource curse is the name for this pattern, in an economic version (slow growth) and a political version (bad governance, conflict and authoritarianism).

Economists Jeffrey Sachs and Andrew Warner found that resource-abundant economies tended to grow more slowly than resource-poor ones, and proposed mechanisms such as 'Dutch disease', in which resource exports raise the exchange rate and crowd out manufacturing. Halvor Mehlum, Karl Moene and Ragnar Torvik argued that the curse depends on institutions: where institutions favour producers, resources help; where they favour 'grabbers', resources hurt. On the political side, Michael Ross (2001) used data on 113 states from 1971 to 1997 to show that oil exports are strongly associated with authoritarian rule, that the effect is not confined to the Middle East, and that other minerals but not other commodities have a similar effect. His Oil Curse (2012) attributes the problem to the unusual size, source, stability and secrecy of oil revenues. Egorov, Guriev and Sonin found that oil-rich dictatorships also have less free media.

• Nigeria, Angola and Equatorial Guinea, where oil wealth coincided with corruption and, in Nigeria and Angola, civil war.
• The Gulf monarchies, among the most durable autocracies.
• Counter-examples: Norway, Botswana (diamonds) and Chile (copper), which managed resource wealth within accountable institutions, and are often cited as evidence for the institutional conditions in the theory.

Stephen Haber and Victor Menaldo (2011), using historical data and country-specific time-series methods, found that increases in resource reliance are not associated with authoritarianism and in many specifications suggest a 'resource blessing'. Jørgen Andersen and Michael Ross replied that Haber and Menaldo may be right for the period before the 1970s, but that a pronounced curse emerged after about 1980, once developing-country governments captured oil rents that had previously gone to foreign companies. Others argue that resource dependence, rather than abundance, is the problem, and that both may reflect weak institutions rather than cause them.

Ross's 2015 review concludes that there is robust evidence that petroleum tends to make authoritarian regimes more durable, to increase certain types of corruption and to help trigger violent conflict in low- and middle-income countries; the economic growth curse and the role of non-oil resources are less settled. Remedies under discussion include transparency initiatives, fiscal rules, sovereign wealth funds and direct distribution of resource revenue to citizens.