Acknowledgement
This paper will not be possible without the aid of [academic institution or instructor]. Additionally, those who had extended their help. [Names], are very much appreciated. Mistakes could have been made, but is is learning with all of the people around that makes everything worthwhile.
Abstract
Economic growth is influenced by the amount of natural resources in a country. The exact manner by which it affects economic growth, however, is still disputed. While historical data and information may suggest that economic growth may be assured to those with more natural resources, it had been observed that there is a curse in countries that are rich in natural resources in the form of slow economic growth. Data and studies have failed to prove that there is a positive correlation between natural wealth and economic wealth. Additionally, there are also countries that have less natural resources that have sustained their economic growth. Furthermore, the existence of the curse has not yet been explained by a universal theory.
Methodology
This paper was done by first looking up natural resources economics. From there, related topics surfaced. As such, it had been noted that the concept of the curse of natural resources exist. The journal article was likewise found through a search of the term “natural resource curse” on various database and then summarized.
The Curse of Natural Resources (Sachs and Warner)
People often view that natural resources may serve as an opportunity for a country to have an accelerated economic growth. However, there exists an idea that natural resources bring in a “curse” that compromises economic growth and brings in poverty and inequality. Patrick (2012) had further emphasized that understanding the curse may help give countries the opportunity to fight against the curse. This paper is likewise a summary of “The Curse of Natural Resources” by Jeffrey D. Sachs and Andrew Warner.
There is an observation that countries that have plenty of natural resources have suffered with poor economic performance. This has been illustrated by many studies in the past while evidences continue to emerge. Countries with plenty of natural resources after the World War II, for example, had poor economic growth. The existence and the reason for the existence of the curse of natural resources had been the center of interest for some (Sachs and Warner, 2001).
As for its existence, empirical evidences suggest that the curse of natural resources is in fact true, but not for all. Firstly, there are countries with plenty of natural resources that fail to prove that there is a positive relationship with their natural wealth and economic wealth. There have been no remarkable differences with their economic growth and that of countries with a relatively lesser amount of natural resources. Secondly, there are countries that are rich in natural resources that have not experienced economic growth. The Oil States in the Gulf, a region which is extremely rich in natural resources, have failed to improve its economic stability despite the large demand for their resources in the global market. Nigeria, Venezuela, and Mexico, all of which are countries rich with natural resources, have also not showed stellar economic growth. Additionally, the growth data from as early as the end of the World War II had shown that the intensity of natural resources is correlated with slow economic growth (Sachs and Warner, 2001).
Sachs and Warner also pointed out that there is a popular belief that countries that rich countries have become so with the help of their natural resources. Historical data, including a work from 1962 by Habakkuk, showed that if a country has more natural resources, the country would surpass other countries. This was said to be the case for the United States in comparison with England during the 19th century. In addition, a statement by former President Clinton had also put importance on natural resources for the improvement of the economy of West Africa. However, the data that supports this conclusion is scarce (2001).
There is no universal theory that may explain the curse of natural resources. However, there are existing explanations that try to give the reason for the existence of the curse. Among them is that natural resources have the ability to crow-out or harm economic growth. Examples of ways that natural resource may harm economic growth is by the activities that it may bring such as “traded-manufacturing activities”. There is likewise a correlation with the amount of natural resources and the non-trade prices between countries. Furthermore, the failure of countries with plenty of natural resources to export efficiently had resulted in the failure in economic and other forms of growth (Sachs and Warner, 2001).
References
Patrick, S. (2012). Why Natural Resources Are a Curse on Developing Countries and How to Fix It. The Atlantic. Retrieved March 25, 2016, from http://www.theatlantic.com/international/archive/2012/04/why-natural-resources-are-a-curse-on-developing-countries-and-how-to-fix-it/256508/
Sachs, J. & Warner, A. (2001). The Curse of Natural Resources. Elsevier, 45 (1). 827-838.
