Natural Resource Wealth, Development and Social Policy: Evidence and Issues

Natural resource wealth potentially provides a source of funds for governments to invest in development. But several recent studies have suggested that countries rich in natural resources have in fact performed poorly in developmental terms. Prior to the late 1980s, natural resource wealth was widely seen as a blessing for developing countries. In the 1960s, for instance, the prominent development theorist Walter Rostow (1961) argued that natural resource endowments would enable developing countries to make the transition from underdevelopment to industrial ‘take-off, just as they had done for developed countries such as Australia, the United States and the United Kingdom (UK). In the 1970s and 1980s, neoliberal economists such as Bela Balassa (1980), Anne Krueger (1980) and P.J. Drake (1972) put forward similar arguments, with the former, for instance, arguing that natural resources could facilitate a country’s ‘industrial development by providing domestic markets and investible funds’ (Balassa 1980: 2). But now natural resource wealth is widely seen as a curse. Rather than promoting development, it is argued, natural resource wealth in fact reduces economic growth, increases poverty, impairs health and education outcomes, impedes democracy, lowers the status of women, and increases the incidence, duration and intensity of civil war.