Natural Resource Curse and Economic Growth

Contributing Factors to the Natural Resource Curse: Socialization, Poor Governance,  Rent Seeking and the Dutch Disease

Many African countries face a resource dependence problem. More specifically, Africa is shown to be “most distinctive in terms of natural resource dependence.” (Collier, 2008, p. 222) Part of the logic for such a dependency lies in the population-land ratio, according to which the latter is distinctively higher than the former. (Collins, 2008, p. 222) As such, the focus of policy becomes the land and the resources it contains within it, as opposed to the populace. Moreover, “for various reasons, Africa has not managed to break into the global market for manufactures.” (Collier, 2008, p. 222) One of the crucial features of developing countries is a successful manufacturing sector: the inability to develop this sector in favor of the reliance on natural resources can be considered part of the reason for its lack of growth, and even decline. The result of such dependence is a clear lack of revenue diversification -  governments exploit natural resources and sell them to individuals or big companies in order to make profit. Those big companies or individuals make huge profit, but citizens cannot make money. The viewpoint is thus one of short-term profit, as opposed to a long term economic and political ideology with a decisively ethical character.

Such reliance is directly correlated to the ubiquity of conflicts in the form of civil wars within Africa. Africa has the most civil conflict in the world, and half of these conflicts are classified as civil war (Ross, 2001). According to Ross, there are two main reasons as to why natural resources engender civil war: growth reduction and the increase of poverty. (2003, p. 18) Citing studies from the World Bank, the author underscores that states which rely on the natural resources of the mining sector find that their GDP per capita fell. (Ross, 2003, p. 20) The focus on natural resources correlates to high poverty. For Ross, therefore, “resource-rich governments do an unusually poor job of providing education and health care for their citizens.” (2003, p. 20) The logic behind this correlation can be phrased as the priority of land over people in these government ideologies: the value of the land is directly disproportionate to the value of the people. The general neglect of the citizenry suggests that such governance views the populace as only a means to the country’s presupposed real value which is its natural resources. From such a hierarchy of values, it is clear, following Ross, why poverty is engendered. The money garnered from natural resources is not re-invested into the populace of the country; it is rather re-invested in the natural resource, thus creating a vicious circle. As Ross notes, “it is not surprising that people are more likely to rise up against their government when their economic predicament is bad and getting worse. Rebel groups find it easer to recruit new members when poverty and unemployment are widespread, since the prospect of combat and looting seems more attractive by comparison.” (2003, p. 21) Specific examples are clear, as many African countries, such as Congo, Angola, and Liberia have had civil wars linked to resource dependence from 1990 to 2002 (Ross, 2003, p. 18).

Africa is one of the poorest regions in the world. Those countries with abundant natural resources usually hardly provide enough education and health care to their citizens. According to Ross (2003), trends show that high reliance on natural resource exports can lead to high poverty rate. Moreover, among the world’s top twenty most natural resource dependence countries index, twelve of those countries are classified as “highly indebted poor countries” (Ross 2003). Additionally, Ross (2003) finds that the child mortality rates of those poorest countries are higher than other nations. In these countries, the mortality rate of children under the age of five went up 12.7% during the past decade. The higher child mortality rate today, the less people develop the country tomorrow. Therefore, the way of decreasing mortality rate is to change the economic disadvantage and avoid natural resource dependence.

The emphasis on natural resources and the general neglect of the populace that occurs in concert suggests that the primary cause of this correlation is poor management. In other words, the policy makers who are complicit in decision-making concerning how to utilize natural resources are content with the thesis that the natural resources are enough. Why this is not enough is made clear by the aforementioned poverty and conflicts of civil war.

However, it is germane to underscore that such poor management is not the result of a general incompetence. Rather, it is a conscious decision. One of the clear symptoms of the latter is corruption. According to Mbaku, “corruption provides incumbent leaders an incentive to resist change – especially institutional reforms that could cancel their privileges and make it more difficult for them to extract extra-legal income from the economy – and cling on to power at all costs.” (2007, p. ix-x) The psychology of corruption is thus comparable to a selfish decision so as to maintain hegemony. Moreover, this corruption is widespread. Corruption in Africa costs almost $148 billion dollars every year, holding back development and restraining investment. For example, in Cameroon, patients cannot go to the hospital and get treatments without putting money into the doctor’s pocket. Also, if students want to pass tests in Zambia, they need to bribe teachers first (BBC News). Corruption thus consists of two main societal aspects: it is detrimental to the people, while it consolidates the power of the hegemonic class. It can thus be said that in these governments there exists a certain socialization of corruption, in which the latter becomes the normative framework for the carrying out of relations. According to Smith (2007), within the African natural resource exporting countries, governments usually absorb revenues instead of making contributions to society. In 2001, nearly $1,000,000 billion dollars disappeared from the government revenue account of an African country without explanation. (Smith, 2007)

Accordingly, the investigation into the logic behind the natural resource curse concomitantly calls for an examination of the socialization of corruption, in the sense of the latter’s omnipresence. While this is, of course, not exclusively an African issue, (Mbaku, 2007, p. ix) its prominence in Africa serves as an index of poor management – the natural resource problem is consistent with problems of corrupt forms of government, as the riches natural resources generate are used to maintain hegemony, as opposed to engendering civil change. Less account transparency is an excuse for governance, helping them hide corruption. Increasing governments’ accountability is an efficient way to solve the corruption problem and help countries distance themselves from natural resource curse.

A significant aspect of such poor governance is precisely that it creates the aforementioned vicious circle, which creates a “self-reinforcing cycle of poor governance.” (Gupta et al., 2006, p. 37) That is to say, insofar as the government is viewed as corrupt, challenges to government hegemony become less plausible in the eyes of the populace: poor governance is accepted as a fact of life: “citizens demand less and less from their government as their demands go unmet and their expectations diminish.” (Gupta et al., 2006, p. 37) Accordingly, a certain culture of corruption and poor governance becomes endemic in these cases. At the same time, however, what makes the maintenance of this circle possible is the reliance on natural resources – the control of these resources in the hands of the few, i.e., the elite, means a concomitant separation of the populace from the benefits of these same resources. Natural resources become an effective means by which to continue and perpetuate poor governance.

The movement away from the latter would thus consist in a simultaneous re-appropriation of natural resources, so as to engender resource diversification. In other words, the primacy of natural resources must in effect be used to minimize this same primacy. However, this calls for a new form of socialization of natural resources, firstly in a political sense, which means that societies are precisely not highly stratified, i.e., oligarchy, and secondly, in an economic sense, whereby relations between public and private holding of such resources are radically re-thought, so as to find a socialization process that realizes the aim of resource diversification. The control of natural resources by government sources is insufficient, insofar as these governments are corrupt. Hence, a more radical form of socialization is required, in which government is merely a managing tool of these resources, not intending to perpetuate the status quo of government, but rather aiming to create alternatives through a more diverse social and revenue structure.

Such a lack of diversity is demonstrated in the phenomenon of rent-seeking. Fischer notes that the concept of rent-seeking remains diffusive in the academic literature (2006, p. 22), to the point that “there are other expressions and concepts like directly unproductive activities, soft budget constraints or corruption, which are either used as a synonym, subset or related but different aspect of rent-seeking.” (2006, p. 22) Nevertheless, for Fischer, rent-seeking is most equitable with a notion of “profit-seeking.” (2006, p. 22) In relation to natural resources, therefore, the curse of the latter precisely lies in a profit based approach to these same resources, although a profit that is the profit of the few: rent-seeking occurs when some individuals and companies seek their own profit without making productive contribution to society.