Tag Archives: resource trap

Zimbabwe’s Diamonds and the Natural Resource Trap

In my last post, I discussed why access to abundant natural resources is actually counterproductive to the development of poor countries.  The idea comes from Paul Collier, a development economist who penned the book The Bottom Billion, a summary of his findings from thirty years in the industry.  While much of the world lives below the poverty line, there are only a handful of countries that have made no progress in terms of economic development over the last few decades.  In fact, most of these “bottom billion” countries have actually regressed, posting negative GDP growth.  According to these countries, each of these countries has fallen into one or more “traps,” which produce a self-perpetuating cycle of stagnancy, at best, or decline.   Access to natural resources is one of these traps.  Here is an overview of why this is so:

Natural resource wealth, in addition to increasing a country’s propensity for civil war, also creates its own trap. In Collier’s view, natural resources can be a curse, because of “Dutch Disease”, which makes a country’s other export activities uncompetitive, and causes commodity price volatility. Countries of the bottom billion are often too poor to harness the wealth they gain from natural resources, such that other sectors of the economy remain stagnant, prohibiting future economic development.

So the money gained from natural resources is not properly invested in improving other industries, such as manufacturing and agriculture, causing them to atrophy.   Once the natural resources dry up, these industries – the real economy – are unable to sustain the false productivity levels during the natural resource boom, to the detriment of the economy as a whole.  Continue reading

Oil Drilling in the Niger Delta

In a little-known story from the southeastern United States, a large oil rig recently exploded in the Gulf of Mexico, releasing a nominal amount of mildly polluting oil into ocean, killing a few birds and galvanizing retirees in Florida – a political sleeping giant – into action.  This minor environmental calamity, which can hardly be considered more than a nuisance, is indeed tragic, but it pales in comparison to what happens elsewhere in the world.  Take this article from the Guardian, a British tabloid newspaper:

With 606 oilfields, the Niger delta supplies 40% of all the crude the United States imports and is the world capital of oil pollution. Life expectancy in its rural communities, half of which have no access to clean water, has fallen to little more than 40 years over the past two generations. Locals blame the oil that pollutes their land and can scarcely believe the contrast with the steps taken by BP and the US government to try to stop the Gulf oil leak and to protect the Louisiana shoreline from pollution.

“If this Gulf accident had happened in Nigeria, neither the government nor the company would have paid much attention,” said the writer Ben Ikari, a member of the Ogoni people. “This kind of spill happens all the time in the delta.” Continue reading