The Resource Curse

The Resource Curse

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Introduction

Different countries have varying types of minerals and methods of exploitation aimed at reaping maximum benefits from such materials. As such, they possess unique assets, which are explored by the state’s workforce in order to aid in the production of useful products for consumption by either the local or the foreign population (Collier & World Bank, 2003). However, the location and extent of such resources has become a source of conflict for many regions thereby undermining their economic value to a majority of the citizenry. In most instances, corruption, dictatorship and poor governance structures have ensured the failure of such wealthy nations to harness these resources to improve their living standards (Ross, 2004). Consequently, they have enhanced a breakdown in the social and political order as different entities fight to gain control of the lucrative products hence diminishing their monetary value to a vast portion of the populace since only a few people get rich. Resource dependence especially by having a wrong management approach can result in poor economic utilization thereby spelling doom to a country or even an entire generation.

Body

Ownership and control of resources is vital in establishing proper governance structures. Most sites require the guidance of individuals with technical knowledge about the extraction of the minerals and sound financial concepts for marketing and selling the products while reducing expenditure. In most cases, such appointments are politically motivated thereby appointments are made based on tribal or partisan affiliations (Packer, 2015b). Furthermore, such people are directed to work at the behest of politicians and other stakes hence abandoning the will of the people in deciding their destiny. Therefore, overseers of such projects are prone to make decisions based on the wishes of a few well-connected individuals at the expense of the public’s safety or economic standing. In fact, the elite are inclined to use such resources as baits for political mileage in which they channel the proceeds of such ventures to friendly areas thereby winning their support on other issues. By so doing, they are using these features as baits that ransom the public into accepting minimal returns to these investments as few people become rich in the process. Therefore, it makes social contests to be about such resources and this drags development in other crucial areas.

Similarly, over reliance on resources such as oil lowers a country’s bargaining power especially in international markets due to the prospect of depletion and risks involved. Production of such an asset in an unregulated manner increases the potential for erosion of such income generating ventures in future due to extinction thereby rendering a community broke without funds for aiding other developmental projects. In addition, it enhances exposure to both short and long-term risks due to a lack of diversification in international trade. For example, the nation may suffer a currency crisis occasioned by speculative attacks on it by others. It may also endure a foreign debt crisis, which forces it to make concessions and giving away its prized resources to service such loans (Smith, 2004). In both instances, the economic value of these assets declines thus lowering the state’s market share and influence. Such developments have the potential to affect the GDP thereby hampering growth and expansion within the society. Likewise, interference by the state reduces political liberalization hence slowing the adoption of democratic ideals. Most leaders would circumvent written regulations or even amend existing ones to suit their needs and that would be replicated in other socioeconomic issues resulting in the development of unethical behavior (Friedman, 2006). Perpetrators of such schemes would thus gain more power and influence, which provides them with immense authority over dissenting voices hence reducing the public’s integration in civic activism. The drawback of democratic ideals is bound to increase rifts among communities in their scramble for a stake of the assets and that result in ethnic warfare, which could easily lead to secessionist plots. In making such demands, communities would be seeking to regain control of their resources. However, such an occurrence is likely to fuel an all-out war with other ethnicities who consider such items a national resource and the ensuing battles would be costly to the economy due to the destruction of property and loss of lives (Packer, 2015a). Funds would have to be sought for reconstruction activities while a productive labor force would be eliminated thus denying the nation a chance to be competitive in global affairs.

Moreover, monopolization of structures and institutions leads to a decline in accountability and quality of standards thereby affecting revenue streams. For example, most African states have withered in their performance due to nepotism or irregular allocation of mining tenders. In fact, sometimes the suppliers of various services linked to the production of minerals are never changed despite clamor for change yet many people live in poverty. Accordingly, the use of such stale tactics to maintain control of the resources while ignoring the plight of a majority of citizens creates resentment within the nation that threatens social harmony. The disruptions that erupt lead to the closure of many businesses hence rendering some basic functions inoperable. By so doing, trade stalls and the economic situation is hampered as well. The expenditure of state revenue is also a factor that affects the country’s prospects of gaining strength in international markets. For example, abandonment of social welfare policies in favor of capitalistic ones that make a few richer such as tax breaks fro the rich contributes in the creation of a wedge in the society (Packer, 2015b). Such an uneven distribution of proceeds creates a climate of suspicion and coupled with a militaristic approach to ruling, prevents the state from receiving foreign direct investments (Mansfield and Snyder, 2008). Most donor countries and financial organizations have certain transparency and governance stipulations that the recipients have to accomplish to qualify for aid. Failure to institute such reforms for fear of upsetting the local status quo denies such nations the funds for infrastructural developments hence limiting its success in improving the standards of living. Accordingly, embargoes and boycotts could also be initiated and that would cripple the economy thereby aggravating the situation. Higher unemployment ratios may arise and inflation too thus affecting the lifestyles of millions of people who live below the poverty line. The continuity of this standoff can be attributed to the stubbornness of ruling regimes to stick to the exploitation of the resources for the self-aggrandizement of the elite and other cronies (Packer, 2015c). They do not want to affect this dynamic, fearing reprisals and complete annihilations but such a tactic is disadvantageous to a large portion of the population and erodes investor confidence as well.

            Furthermore, incumbency contributes to the unequal distribution of resources due to the lack of a will to relinquish power. In most countries without term limits, general elections form fertile seasons for rewarding certain constituencies in order to win political mileage. Most of the time, the people are misled that the state is cognizant of the citizens plight and would like to transform it for the better. The provision of state benefits and pork projects is seen as a suitable avenue for winning over certain segments of the population (packer, 2015c). Consequently, random people are identified and awarded state resources in exchange for votes. By so doing, the givers do not consider the plunder they are doing to the nation by dishing the country’s assets. It sets a bad precedent in which the electorate would like to be offered freebies in order to remain loyal hence holding the administration hostage. Such developments are sure to cause stagnation in development issues because an unhealthy competition of greed ensues rather than people focusing on other income generating initiatives. In addition, it leads to the creation of a lethargic society whose unproductivity threatens its economic stability. As such, it breeds a culture of lootability in which people feel entitled to stealing from state coffers as a way of forcing officials to acknowledge their significance in maintaining credibility. However, such a system increases levels of inequality thereby sparking numerous chances for conflict between the haves and haves not. The disenfranchised will not sit idly by as others get richer thus they will confront them in the hope of sharing the spoils. By so doing, the nation can easily descend into chaos and sometimes, it might prove difficult to contain the spiraling situation that may result in deaths (Fjelde & Soysa, 2009). Nevertheless, oil wealth strengthens state institutions because it provides them with the flexibility to make investments in other vital sectors of the economy. The revenue generated from such a marketable resource is huge and that can be used to underwrite capital-intensive projects. Furthermore, this resource places a premium in the level of performances for state agencies by raising the profile of the host nation thereby enhancing the expected quality of service delivery. Additionally, it increases the value of a state’s currency thus instituting benchmarks for overall GDP growth in order to maintain high investor confidence (Packer, 2015c). It is important to make such commitments because they help to stabilize the economy as well as improve the standards of living of the citizens thereby becoming a good model of prudent governance for other jurisdictions.

Conclusion

The presence of minerals especially oil in any country is bound to increase that nation’s profile in global events. In most instances, such resources are meant to boost the state’s income generation through exports while creating employment for the local population as well as foreign direct investment. However, it has become a curse to possess these resources in other countries due to mismanagement and autocratic governance styles. In these regions, allocation of such state assets is given to cronies for political expediency in order to secure their loyalty as well as the elite to buy their approval for credibility. In most instances, these developments marginalize a large portion of the population thereby causing divisions that can only be settled through civil war. Over reliance on certain resources increases the risk of the nation’s currency to manipulation by speculations especially in volatile foreign markets (Barbieri & Reuveny, 2005). Similarly, the need to maintain control over such assets leads to the abandonment of democratic ideals. Therefore, these practices serve to decrease the economic benefit to the state thereby lowering standards of living for its citizenry.

 

 

 

 

 

 

 

 

 

References

Barbieri, K. & Reuveny, R. 2005. “Economic Globalization and Civil War.” The journal of Politics 67(4): 1228-1247.

Collier, P., & World Bank.2003. Breaking the Conflict trap: Civil War and Development Policy. Washington, DC.

Fjelde, H. & Soysa, I. 2009. “Coercion, Co-optation, or Cooperation.” Conflict Management and Peace Science 26(1): 5-25.

Friedman, T. 2006. “The First Law of Petropolitics.”

Mansfield, E & Snyder, J. 2008. “Democratization and Civil War.” 5:2-37. University of Pennsylvania

Packer, R. 2015. Resource Curse [a].The Pennsylvania State University.

Packer, R. 2015. The Bottom Billion [c].The Pennsylvania State University.

Packer, R.2015. Financial Crises [b].The Pennsylvania State University.

Ross, M.2004. “What do we know about Natural Resources and War?” Journal of Peace Research 41(3):337-356.

Smith, M. 2004. “Oil Wealth and Regime Survival in the Developing World, 1960-1999. “ American Journal of Political Science 48(2):232-246.

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