Collier - The Natural Resource Trap

Collier, P., The Natural Resource Trap, in The Bottom Billion: Why the Poorest Countries are Falling and What can be Done About it, (Oxford University Press, Oxford UK, 2007)

 

The concept of the 'bottom billion' is used by Collier to characterise and explore why impoverished countries fail to progress despite continuous international aid and other forms of support. The book suggests that whereas the majority of people in developing countries are getting richer at an unprecedented rate, a group of countries, in mostly Africa and Central Asia, are stuck in what he considers development traps.

A component of the development trap is the ‘natural resource trap.’  The book chapter of this name examines the paradox that exists in natural resource rich economies. It is well documented that the discovery of natural resources significantly reduces growth. Collier attributes this to a variety of causes; this includes the principle economic account; ‘Dutch Disease,’ which explains how resource exports cause the country’s currency to rise in value making other exports uncompetitive.  However, Collier notes that economic explanations alone are insufficient to cover the issues that arise due to resource abundance.

He analyses the interaction between resource wealth and political institutions, utilising political science theories with quantitative data, he deduces that natural resource surplus are unsuited to the pressures generated by electoral competition, that is, democracy ultimately has no effect on growth. He goes on to argue that checks and balances are rather the determinants on the use patterns of natural resource revenues, countries like Norway for instance are unique not because of an intrinsic feature but because political restraints were present before the discovery of oil. Natural resource abundance can therefore become a trap where a host of varying and unchecked factors are allowed to fester closing the gap to economic growth. 

Comments
No comments.
button-icon
goxi