Bad news: Mozambique has just discovered between 6 trillion and 8 trillion cubic feet of gas sitting off its shoreline -- quite enough for commercial production. This on top of a recent coal-mining boom is destined to make the country a major natural resource exporter. Joining the East African country in recent misfortune is Papua New Guinea, scheduled to start exporting $30 billion worth of natural gas, and Afghanistan -- particularly blighted by the discovery of iron, copper, cobalt, gold, and lithium deposits with a combined value over $1 trillion. Oh, lackaday. Whatever chance they had of sustaining a stable, economically robust democracy is surely down the pit latrine now.
How so? Enter the resource curse -- the idea that the more stuff dug out from on or under a country, the slower it will grow and the higher the risk it will descend into civil war. Versions of the curse have been around for some time. Back in the 1970s, economists worried about "Dutch disease." Countries that exported a lot of gas or oil would see their exchange rates go up as a result. This, in turn, could make their manufacturing exports uncompetitive. But the idea really picked up steam in the mid-1990s, when Jeffrey Sachs and Andrew Warner, then both at Harvard University, found that countries that exported more agricultural products, minerals, and fuels saw slower economic growth.
Sachs and Warner highlighted Dutch disease and its knock-on effects as the likely cause. But other researchers looking at the same data argued that the link might be through empowering kleptocratic leaders with resource rents or the destabilizing political impact of easy money. In a matter of a few years, resource exports were charged with a host of ill effects -- not least, low education spending, unstable government, civil war, corruption, and poor governance.
The curse is the type of counterintuitive idea that makes for a great newspaper op-ed. Nonetheless, the curse is also the kind of counterintuitive idea where intuition may have been right to begin with. In 1997, the World Bank produced some measures of total natural resource wealth -- including agricultural land, mineral and oil resources, and protected areas. The richest countries in terms of resources per citizen were Australia, Canada, New Zealand, and Norway. Their average income per head in 2008 was $24,430. Jordan and Malawi were at the bottom of the list. Jordan has a per capita income of $5,702; Malawi's is $744. Looking at mineral wealth alone, Venezuela and Norway were at the top, while Belgium, Benin, Ghana (before the recent oil discoveries), and Nepal were at the bottom. While Ghana's oil discovery suggests one problem with the rankings -- rich countries have been better explored for mineral deposits -- nonetheless, the list hardly suggests that resource scarcity is the secret to rapid growth.
Looking at recent growth across countries, Swiss economist Christa Brunnschweiler concludes that economies with greater resource wealth actually grew faster between 1970 and 2000 than resource-poor countries. She also finds no evidence that greater resource wealth is associated with weaker institutions, a finding repeated by Daron Acemoglu at the Massachusetts Institute of Technology.
Together with her colleague Erwin Bulte, Brunnschweiler also looked at the link between natural resources and civil disorder. They found that countries with more natural resource wealth were less likely to descend into civil war in the first place. The same result held whether they were using a broad measure of resource wealth or focused only on minerals or oil. Elsewhere, Stephen Haber and Victor Menaldo of Stanford University and the University of Washington, respectively, studied the relationship between oil revenues and democracy over time across countries. They found that democracies were actually made more resilient by growing oil revenues -- while they couldn't find an impact one way or another when it came to autocracies. Sure, there are cases where oil revenues and autocracy increased together. It is just that there are at least as many cases where that didn't happen -- and more cases where democracy strengthened as revenues went up.
How to reconcile these results with all the papers and articles that find a curse? Earlier studies looked at the importance of natural resource exports at a particular moment in time. There, the relationship holds -- high dependence on resource exports is associated with lower growth and risk of civil war. But that's a strange way to measure "the curse of resources." According to the usual story, the curse involves the misfortune of sitting atop an oil field or diamond-bearing rocks. It's a story of abundance -- as examined by Bulte and Brunnschweiler -- not dependence.