The Resource Curse
In recent years, it has become fashionable to argue that the less-developed countries should pursue rapid industrialization, in many cases on the back of the exploitation of rich mineral, oil, and other resources. Around one third of the growth in GDP in Africa between 2000 and 2008 (at nearly 5 percent per annum) has come from these resources and from the associated government spending they generate. Africa is projected to continue to profit from the rising global demand for natural resources given that the continent contains 10 percent of the world’s oil reserves, 40 percent of its gold, and 80 to 90 percent of the chromium and platinum metals.6
But so far, the experience has not been accompanied by much trickle down and indeed many African countries, particularly oil-producing countries, have suffered from conflict and have reversed progress toward poverty reduction and greater social freedoms.7 Although in the short term the export of natural resources may increase wealth, it tends to lead to a distortion of the economy, characterized by a lack of investment in such sectors as agriculture and manufacturing. Furthermore an economy highly reliant on nonrenewable natural resources may not be sustainable. Such resources are part of a country’s overall capital stock, and for a country to be on a long-l asting development path, it must save enough to cover their depletion. This frequently does not happen.