Coal extract
When I was nine I asked my mother why Australia, Europe and North America – the developed world - was so rich when comparably people in Africa, South America and much of Asia were so poor. Her response was simple and easy to understand: Resources. That countries blessed and well endowed with natural resources such as: coal, oil, gas, uranium ore, iron ore, zinc, copper, gold, rubber, timber, diamonds and silver were richer than countries who were on the unlucky side of the natural commodities luck-of-the-draw. This explanation satisfied the younger, naïve and curious Kylos.
But like so much of what your parents tell you when you’re younger and how many people try to answer complicated questions with simple answers, it is actually very wrong. In fact poverty is not determined solely by natural resources or commodities and in fact many impoverished countries are instead blessed with an abundance of natural resources. Mexico, Angola, Ecuador, Sudan, Iran, Venezuela, Peru, Iraq, Russia, Indonesia, East Timor, Azerbaijan, Nigeria and Algeria are comparably blessed with relatively higher concentrations of natural resources, but in contrast Japan, France, Germany, Switzerland, Taiwan (ROC), South Korea, Israel, England, Denmark and the USA** (relative to its population and size) are much less blessed. Most people would quickly realise that all the comparably resource poor countries of the second group are vastly richer than the resource-rich first group. Of course there are exceptions: Australia, Canada, the United Arab Emirates, Qatar and Saudi Arabia are all resource rich-”rich” countries, but I am trying to counter the false impression most people have: that the natural distribution of commodities is the ultimate determinant of the division between richer and poorer countries. A graphic example of this is that between 1965-1998 the global production and consumption of oil expanded, but the oil-rich Organisation of Petroleum Exporting Countries (OPEC) nations suffered an average real GDP decline of -1.3% per year during this period (Gylfason, 1998).
The paradox that countries richer in resources are often poorer, or have a tendency for lacklustre economic growth is known as the Resource Curse. The link between resource dependence and poor economic development has been argued by numerous authors such as Gelb, 1998; Karl, 1997; Ross, 1999, 2001 (cited in Robinson, Torvik and Verdier, 2006).