The resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of natural resources (like fossil fuels and certain minerals), tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources. There are many theories and much academic debate about the reasons for and exceptions to these adverse outcomes. Most experts believe the resource curse is not universal or inevitable, but affects certain types of countries or regions under certain conditions
30. Describe the economic face of the resource curse. Give concrete examples of how it materializes in certain regions or countries.
= dutch disease, the economic face of the resource curse.
ECONOMIC COSTS :
LARGE SCALE RECOURSES EXPORTS WICH MAKES THE DEMAND FOR LOCAL CURRENCY GO UP WHICH RAISES THE EXCHANGE RATE :
= exports by other sectors become more expensive. loses competitiveness, imports become cheaper.
= local manufacturing suffers
VOLATIRE REVENUES:
Unpredictable business and fiscal environment.
NON oil merchandise exports still very low in the region
Dutch disease makes tradable goods less competitive in world markets.
As imports become cheaper in all sectors, internal employment suffers and with it the skill infrastructure and manufacturing capabilities of the nation.
To compensate for the loss of local employment opportunities, government resources are used to artificially create employment.
The increasing national revenue will often also result in higher government spending on health, welfare, military, and public infrastructure, and if this is done corruptly or inefficiently it can be a burden on the economy.
While the decrease in the sectors exposed to international competition and consequently even greater dependence on natural resource revenue leaves the economy vulnerable to price changes in the natural resource; however if it is managed inefficiently or corruptly this can lead to disastrous results.
Dutch Disease first became apparent after the Dutch discovered a massive natural gas field in Groningen in 1959. The Netherlands sought to tap this resource in an attempt to export the gas for profit. However, when the gas began to flow out of the country so too did its ability to compete against other countries' exports. With the Netherlands' focus primarily on the new gas exports, the Dutch currency began to appreciate, which harmed the country's ability to export other products. With the growing gas market and the shrinking export economy, the Netherlands began to experience a recession. This process has been witnessed in multiple countries around the world including but not limited to Venezuela (oil), Angola (diamonds, oil), the Democratic Republic of the Congo (diamonds), and various other nations. All of these countries are considered "resource-cursed"
31. Describe the political face of the resource curse. Give concrete examples of how it materializes in certain regions or countries.
Natural resources are a source of economic rent which can generate large revenues for those controlling them even in the absence of political stability and wider economic growth. Their existence is a potential source of conflict between factions fighting for a share of the revenue, which may take the form of armed separatist conflicts in regions where the resources are produced or internal conflict between different government ministries or departments for access to budgetary allocations. This tends to erode governments' abilities to function effectively.[20][21]
Even when politically stable, countries whose economies are dominated by resource extraction industries tend to be less democratic and more corrupt.
= lack of democracy : Research shows that oil wealth lowers levels of democracy and strengthens autocratic rule. There are two ways that oil wealth might negatively affect democratization. The first is that oil strengthens authoritarian regimes, making transitions to democracy less likely.[2] The second is that oil wealth weakens democracies
oil rent:
* low levels of taxation, no pressure for representation
* government expenditure and targeted patronage (buying votes and support)
* insulation (isolation) from western pressure to democratize
* enables political repression
* economy doesn't develop an independent middle class (oil industry + civil servants instead)
eg uae, saudi arabia, qatar, kuwait, etc
32. What are the major factors influencing the price of oil on world markets?
China’s Economy. China is the second largest consumer of oil in the world and surpassed the United States as the largest importer of liquid fuels in late 2013. More importantly for oil prices is how much China’s consumption will increase in the coming years.
OPEC’s Next Move. OPEC is very influential they are over price swings. Organization of the Petroleum Exporting Countries
Geopolitical flashpoints. In the not too distant past, a small supply disruption would send oil prices skyward.for example, violence in Libya blocked oil exports, contributing to a rise in oil prices. Nevertheless, history has demonstrated time and again that geopolitical crises are some of the most powerful short-term movers of oil prices.
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