Natural Resources, Neither Curse nor Destiny

Natural Resources, Neither Curse nor Destiny

Natural Resources, Neither Curse nor Destiny

Natural Resources, Neither Curse nor Destiny

Synopsis

This collection of articles studies the role of natural resources in development and economic diversification. Novel theoretical, econometric and historical analyses suggest that natural resources per se do not necessarily hamper economic growth nor economic diversification.

Excerpt

This book addresses two key questions for policy makers in natural resource-rich regions such as Latin America: First, is natural resource wealth an asset or a liability for development and, if potentially the former, how can its contribution be enhanced? And second, can countries rich in natural resources efficiently diversify toward manufacturing or service-sector exports?

The first question may seem surprising to many: why would anybody doubt that wealth (of a particular form) is bad? The reality is that specialization in natural resource-based activities has suffered from a kind of “yellow press” among economists for a long time, beginning with Adam Smith. In particular, the work of Prebisch convinced generations of Latin Americans that natural resource-based activities were somewhat inferior to manufacturing, both because of their assumed lack of “technological intensity” and because of the low elasticity of world demand, which would lead to a long-run trend of deteriorating relative prices. Prebisch’s articles were a key intellectual driving force behind the decades of Latin American “import substitution” policies that taxed natural resource-based activities and protected manufacturing. Even today, based on the work of several contemporary authors who have argued that resource-rich developing countries have grown more slowly than other developing countries since around 1960, many in Latin America and Africa feel that these countries should do whatever is needed to shift toward manufactured-led exports. Given the persistence of these views in our region, some years ago the Chief Economist Office of the World Bank began a research program on these issues; the first results were published in the report “From Natural Resources to the Knowledge Economy.” The current book collects updated versions of some of the background papers originally committed for that report and other recent contributions on the subject.

It is true that wealth can be wasted and can lead to destructive behaviors. There are many examples in the developing world of natural resourcerich societies that have become immersed in “rent-seeking” activities and even in civil strife. But is this the general rule? Isn’t it true that many of the . . .

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