Curse of Abundance

Curse of Abundance

1. Introduction

Curse of abundance is a term used to refer to the paradox that countries and regions with an abundance of natural resources, specifically non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources. This is hypothesized to happen for many different reasons, including a decline in the competitiveness of other economic sectors, volatility of revenues from the natural resource sector due to swinging of global commodity market, government mismanagement of resources, or weak, unstable or corrupt institutions.

From the above definition it is evident that it’s not what we have in the ground that matters but what we do with it. It will not be a surprise if this study showed that many countries are lagging behind in terms of development in spite of the rich resources they are enjoying. Many studies have pointed out that developing countries with abundant natural resources are likely to develop less and at a slower rate than resource-poor countries [Perkins, et. al.,). The curse associated with the abundance of natural resources is generally attributed to the following factors:

* The volatility of the markets (prices) of natural resources which lead to the vulnerability of the country that depend mainly on the production of natural resources;

* The economy of the country that depends on natural resources is prone to “Dutch Disease.” Which shift the focus away from other sectors except the exploitation of natural resource sector resulting in decreased production particularly industry and agriculture.

* The large amounts of revenues created could lead to corruption, abandon investment, and trigger ethnic and political conflicts.

2. The resources curse in Africa:

The negative impacts that the abundance of and high dependence on oil and other natural resources have on economic growth and development in many...