Area: Sub-Saharan Africa ARI 172/2010 Date: 15/12/2010 The ‘Resource Curse’: Theory and Evidence (ARI) Jonathan Di John * Theme: Mineral and fuel abundance does not determine either the political or economic trajectory of less developed countries. Summary: This paper undertakes a critical survey of the ‘resource curse’ –the idea that mineral and fuel abundance generates poor economic performance in less developed countries–. It examines the proposition that mineral and fuel abundance generates growth-restricting forms of state intervention and extraordinarily large degrees of rent- seeking and corruption, which are generally argued to be negative in terms of the economic growth outcomes they generate. The analysis surveys the Dutch Disease, rentier state, and rent-seeking versions of the resource curse and finds they have significant shortcomings in terms of both theory and evidence. It also discusses particular growth strategies that have been effective in producing long-run economic growth in mineral- and fuel-abundant developing countries. Analysis: Introduction One of the more influential ideas in recent development discourse and policy is the so- called ‘resource curse’. The big idea behind the ‘resource curse’ is that mineral and fuel abundance in less developed countries (LDCs) tends to generate negative developmental outcomes, including poor economic performance, growth collapses, high levels of corruption, ineffective governance and greater political violence. Natural resources, for most poor countries, are deemed to be more of a ‘curse’ than a ‘blessing’. In terms of intellectual history, this negative view of mineral and fuel abundance goes against much of the earlier thinking on the subject. Many analysts suggested a historically positive association of natural resource abundance and industrial growth in many now advanced countries. For instance, the ‘staple thesis’ demonstrated that growth in backward areas commonly began through the initial stimuli that primary product exports brought in terms of attracting capital and labour and inducing a more diversified production structure (Innis 1930; Watkins 1963). Also, natural resource rents, to the extent they are appropriated by state governments, can relax common resource constraints to growth –namely the savings, foreign exchange and fiscal constraints (Gelb & Associates, 1988, p. 17-18)–. 1 * School of Oriental and African Studies (SOAS), University of London. 1 Findlay & Lundahl (1999) find a generally growth-enhancing role of natural resource-rich countries in the period 1870-1914. 1