Sub-saharan Africa and the resource curse

The idea that natural resources, such as crude oil, can have a detrimental effect on economic development is not new. The relevance of this issue is only increasing with the rise in global commodity prices and the emergence of China, India, Brazil and new players as serious investors in the natural resource sectors of low income countries. The notion of a resource curse also motivates various global policy measures such as the Extractive Industries Transparency Initiative. Thus, major questions on the development agenda are: is there a resource curse and what can be done about it?

A critical look
A new study by Sam Jones, researcher in DIIS`s Trade and Development research unit, takes a critical look at these questions with a particular focus on sub-Saharan Africa. While there is no doubt that some countries have benefitted little from their natural resource wealth, it is not clear that there is a systematic pattern. From a theoretical perspective there are numerous potential determinants of low growth linked to institutional (governance) fragilities. Natural resources represent one channel through which institutions can be weakened, but they are hardly the only or even the most important one.

The argument of the study is that the resource curse debate should be placed in the much broader context of how institutions evolve and affect growth. This is backed-up by empirical evidence that suggests simple or isolated stories about how natural resources affect growth cannot be supported. At the same time, we must admit that our understanding of how institutions evolve remains limited and much work needs to be done. Consequently, we should have modest expectations about how far externally-oriented initiatives can “solve” development challenges in third countries. Rather, more emphasis should be placed on promoting learning and experimentation to find local solutions to what evidently are very complex problems.