Resource curse
Hypothesis that natural resource wealth can hinder economic growth and democracy.
The resource curse, also known as the paradox of plenty or the poverty paradox, is the hypothesis that countries with an abundance of natural resources such as fossil fuels and certain minerals have lower economic growth, lower rates of democracy, or poorer development outcomes than countries with fewer natural resources.
- Field
- Economics, political science
- Key concept
- Natural resource abundance may hinder economic growth and democracy
- Notable researchers
- Jeffrey Sachs, Andrew Warner, Bruce Bueno de Mesquita
- Affected countries
- 51 classified as resource-rich by IMF; 29 are low- and lower-middle income
Lore & Background
The resource curse hypothesis gained traction during debates in the 1950s and 1960s about the economic problems of low- and middle-income countries. Many observers have likened the resource curse to the difficulties that befall lottery winners who struggle to manage the complex side effects of newfound wealth. Bruce Bueno de Mesquita, who developed selectorate theory, explains that when an autocratic country has lots of natural resources, the ruler's optimal strategy for political survival is to use that revenue to buy the loyalty of critical support groups and oppress the rest of the population by denying them civil liberties and underfunding education and infrastructure. By contrast, in a dictatorship with few natural resources, there may be a necessity for the ruler to liberalize his society somewhat so that the economy can be organized more efficiently. Bueno de Mesquita cites Ghana and Taiwan as examples of countries where the rulers permitted democratization out of necessity.
Reader's Guide
The resource curse hypothesis has been a central topic in development economics and political science since the 1990s. The International Monetary Fund classifies 51 countries as 'resource-rich,' defined as deriving at least 20% of exports or fiscal revenue from nonrenewable natural resources; 29 of those are low- and lower-middle income. Common characteristics include extreme dependence on resource wealth, low saving rates, poor growth performance, and highly volatile resource revenues. As of at least 2023, there is no academic consensus on the effect of resource abundance on economic development. A 2021 meta-analysis of 46 natural experiments found that price increases in oil and lootable minerals increased the likelihood of conflict. The concept of Dutch disease, first apparent after the Netherlands discovered a huge natural gas field in Groningen in 1959, describes how a booming resource sector can harm other sectors through currency appreciation and reduced competitiveness.
Frequently Asked Questions
What is the Resource curse?
The Resource curse is an economic hypothesis arguing that nations sitting atop vast oil, gas, or mineral deposits often grow more slowly and develop weaker democratic institutions than their resource-poor peers. It goes by several nicknames, including the paradox of plenty and the poverty paradox.
What are the Resource curse's powers or mechanisms?
In practice, the concept describes how windfall resource revenues can crowd out economic diversification, incentivize corruption, and reduce a government's need to tax—and therefore answer to—its citizens. Scholars such as Jeffrey Sachs, Andrew Warner, and Bruce Bueno de Mesquita have each mapped different facets of these dynamics.
How does the Resource curse's story end?
There is no single resolution, but strong institutions, transparent revenue management, and deliberate diversification can blunt the negative effects. The IMF classifies 51 countries as resource-rich, yet only 29 of them sit in the low- or lower-middle income tier, showing the curse is a tendency rather than an inevitability.
Why is the Resource curse important?
It upends the common assumption that natural wealth automatically brings prosperity and good governance, forcing policymakers to design institutions that convert commodity rents into broad-based development. Without that lens, resource-rich states risk locking in the very poverty and authoritarianism the paradox predicts.
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