Governance strategies to remedy the natural resource curse

Abstract

Rising commodity prices in recent years have deepened awareness of the paradox of the resource curse – resource‐rich countries consistently facing high levels of poverty, corruption and instability. There is relatively less recognition of the autocratic roots underlying much of this curse, however. Resource‐rich autocracies, on average, are subject to lower levels of well‐being, higher volatility, a greater propensity for conflict and humanitarian crisis, and more corruption than resource‐rich countries on a democratic path. The resource curse persists because sharp inequalities of power limit opportunities for corrective action. Recognising the governance root to the natural resource curse dictates that remedial strategies for resource‐rich democratisers should differ from those for resource‐rich autocracies. In the latter, effective reform strategies must increase the cost of rent‐seeking by the privileged minority and improve the capacity for collective action among the disadvantaged majority. While resource‐rich autocracies do not rely on international assistance for budgetary support, they generally must tend to reputational and investment concerns. Accordingly, there is an important role for international actors – governmental, civil society organisations and the private sector – to play in reversing the resource curse.

Crude oil revenue and economic development in Nigeria (1974–2008)

“…Volatility in oil and mineral prices may thus have large impacts on the overall economy and on government budgets, causing greater uncertainty and lower growth (Havro and Santiso, 2008). A standard measure of variation, the coefficient of variation, shows that resource‐rich countries experience 60 per cent greater volatility in their growth than the global norm (Siegle, 2009, p. 47). Fatas and Mihov (2003, 2005) had shown that generally speaking, a country's average per capita growth rate over the period 1960–2000 is negatively correlated with output volatility of the government consumption share.…”

Extractive Industries and African Democracy: Can the “Resource Curse” be Exorcised?

“…The risk of violent conflict is significantly higher in mineral resource-rich countries than in countries with other abundant natural resources such as fertile land. Siegle (2007) found that hydrocarbon-rich countries were twice as likely as others to experience intrastate conflict, and Fearon (2005) showed that oil exports predicted higher civil war risk. The Bonn International Center for Conversion (http://www.bicc.de) has developed an index of resource governance and an index of conflict intensity, and has found a strong negative correlation between the quality of resource governance and the intensity of civil conflict.…”

Governance and foreign direct investment in Latin America: A panel gravity model approach

“…The "resource curse" arguments refer not only to de-industrialization and slower growth rates but also to internal conflicts, autocratic regimes and corruption (Siegle, 2007). The existence of extensive natural resources is often associated with large FDI infiows as well as a poor governance environment.…”