Meghan L. O'Sullivan, Adjunct Senior Fellow
A significant issue concerning natural resources is "the resource curse"—the unfortunate reality that countries with natural resource wealth tend to grow more slowly than countries without such riches. Though seemingly counter-intuitive, multiple cases demonstrate that natural resources invite many challenges for developing countries. Some are political, such as the increased chance of violent conflict or pervasive corruption. Others are economic, as in how big inflows of dollar wealth cause a currency to appreciate, hurting non-trade sectors including agriculture and manufacturing.
Research and experience, however, have taught us that the resource curse, while common, is not inevitable. But despite having clear prescriptions about what should and should not be done, countries facing big, new resource finds or developments—Uganda, Liberia, East Timor, Mozambique, Peru, even Iraq—struggle not to become victims to the resource curse.
What is needed is not more research on what causes the curse, but better and more practical thinking and writing on how countries can avoid it. Most prescriptions from existing research today focus on the need to build on solid, accountable, transparent institutions in creating particular policies and frameworks. But most of these countries do not have such institutions, or are just beginning to develop them. More practical work on how to help nascent democracies and countries just emerging from conflict manage big resource finds is still very much in demand.