Resource Curse of the Dutch Disease
A country full of mineral wealth is known to be rich in natural resources. It is assumed that this type of country will be having better economic growth by exporting the minerals to other countries. But the mineral rich countries are having less economic growth. This is termed as "Resource Curse"(ECON3056, 143)
A country rich in minerals exports to other countries. Higher exports leads to higher exchange rate and the other sectors of the exporting country become less competitive in the world market due to the appreciation of their currency and incur losses. This ultimately leads to slow economic growth. These economic effects for a country rich in resources is known as "Dutch Disease". For example, Canada is rich in minerals and major exporter of oil facing the problem of slow economic growth( ECON3056, 145).
These countries having natural resources like coal , oil , natural gas, diamond and other minerals are having problems of corruption, inequalities between the rich and the poor, poverty, unemployment, misuse of property laws, rivals between the locals. The resources are illegally traded and exported by local business with the help of corrupt politicians. The residents of the country who are also entitled to enjoy the resources of their country suffer and the countries economic and political situation suffers.
But this slow growth can be avoided if the government takes proper measures like implementing regulations, policies and taxation so that the minerals are not exported illegally and encouraging the other sectors to invest, generating employment, maintaining their exchange rate. There are examples of many countries who have improved their economic growth and are developed country like Canada.
I find this "resource curse" quite interesting because a mineral rich country is supposed to be a rich country but the economic situation is totally different . These countries face a lot of problems even being gifted with valuable resources.
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