It is already not surprise that resource rich countries often do worse than their poorer neighbors instead of benefiting their huge natural wealth. This phenomenon is so called natural resource curse, which is encountered with resource rich countries, leading them to the slow economic development and political, social failure. But, this is not entirely applicable in every case. When we look at the countries like Norway, Chile and Botswana, those are also rich in the natural resource and showing the quiet impressive achievement with the help of it. So question here is that whether natural resource is curse or blessing. For some yes, for some no. The main point is the matter of the country and how it is dealing with its wealth. And answer would be given by connection between economic and political theory.
There are many types of the curse in economic as well as political sense, which have been studied intensively by leading economist, political and social scientists. From those various disadvantages resulting from natural wealth, here I would mention main four, which may relate more with my case studies. Those are Dutch disease, Volatility in commodity prices, Political corruption and Erosion of democracy. First two are purely concerned with economics and last two are more related with political conditions, moreover where are my main interest in.
It becomes already clear for us that the natural resource wealth is leading to the bad economic performance in some countries. But what should we blame for that unsatisfied result: the huge natural resource or the country (people), who are incapable of spending it in the right way. Here, by people I mean the state, the government of the country and its institutional quality. When the state is transparency and accountability and checks and balance system work in the government, there is no such phenomenon, named "Resource curse". However, once it is occurred in the country, there are also numbers of ways to cure it such as economic policy change, political and social change, distribution of the natural resource curse to the citizen, privatization of the natural resource sector, international level help.
There are two main motivations for me to write this paper: academic as well as personnel. I am from the country, which has one of the fastest growing economies in the world, ranking at 5th in 2012 [1] . All of this has been driven by mining (coal, copper, uranium, gold, rare earths, and the like). Much of its natural resource wealth has come from a long-standing Russian-Mongolian joint venture, Erdenet, but has recently been joined by two giant newcomers, the Oyu Tolgoi (OT) and Tavan Tolgoi (TT) mines in the Gobi desert. Sadly, before the discovery, we didn't have very mature strong democracy and qualified institutions to avoid the curse as Norway did. It has already started to experience problem of corruption and other ills derived from the resource curse. In the end of the paper, I would write about the possible cure for resource curse in case of Mongolia, since it had already overcome its avoiding stage.
Natural resource curse v/s economic development 自然资源诅咒与经济发展
The view, that natural resource exports were at serious disadvantage, was the minority in economics until the late 1980s. Later literature started to suggest that natural resource abundance might be curse than blessing. From Figure1, we can see that there is negative relation between the GDP growth and natural resource export level. For example, the countries like Hong Kong, South Korea are less exporting their natural resources and at thesame time showing the higher economic growth when the countries like Bolivia, Venezuela are other way around.
Source: World Development Indicator database (World Bank), Primary exports consist of agricultural raw materials exports, fuel exports, ores and metals, and food exports. [2]
This phenomenon, where we see negative correlation between resource abundance and economic growth, is so called "Natural resource curse". It has been studied by many economists during the time. Richard Auty was the first, who described that resource-rich countries not only fail to benefit from a favorable endowment, they may actually perform worse than less-endowed countries. This counter-intuitive outcome is the basis of the resource curse thesis. [3] Also, Jeffrey Sachs and Andrew Warner, showed that countries with huge mineral wealth grow slower than those recourse-poor countries. So, it is certain that there is negative correlation between the natural resource abundance and economic growth, but it is inconclusive when we see countries like Norway, which has huge natural resource and tremendous economic achievement at the same time. From the various numbers of studies, we can see that natural resource curse is not applying to the every case. The some countries, which have efficient economic policy and transparent, democratic political institutions, have performed excellent in long term economic development with the help of their wealth. Norway, Australia, Chile, Argentina, United Arab Emirates are examples of that how resource could be avoidable. From here, question is coming to what to do and what are the possible solutions, if the curse is unavoidable, if it happens to the state, which doesn't have effective institutions.
The list of costs to the resource rich countries speaks for itself: slower than expected growth, barriers to economic diversification, poor social welfare indicators, high level of poverty, inequality and unemployment, higher than average corruption, poor governance, outright authoritarian rule or its omnipresent threat, weak rule of law, a culture of rent seeking, often devastating environmental damage, human rights violation, and greater risk of conflict and war. [4]