GEOG 2400 GEOGRAPHY OF WORLD DEVELOPMENT

1
GEOG 2400 - GEOGRAPHY OF WORLD DEVELOPMENT

• Natural Resources and the
• Resource Curse Theory

Spring 2002
2
Natural Resources

• Thousands of years of history and the
  geographical concentration of technology and
  wealth has meant that having natural resources no
  longer appears to be a key to prosperity.
• Some of the wealthiest nations have negligible
  natural resource bases (Japan, Luxembourg,
  Switzerland) and some of the most resource rich
  are very poor (Angola, Zaire/Congo, PNG).
• However, access to resources, particularly oil
  and important minerals, nevertheless remains
  critical and helps govern foreign and
  macroeconomic policy decisions of resource
  importers.

3
Places along Rostows model of how nations
become developed

• Industrialized nations
• Newly industrialized and Emerging developing
  nations
• Developing nations with resources to export
• Developing nations with little basis for economic
  growth

(Prentice Hall Geotutor CD-Rom 1999)
4
Resources and Development

• If one accepts Rostows model of how nations
  developed, raw materials often played a
  significant role (e.g. wool for textiles, coal
  and iron-ore for manufactures) in the build-up to
  take-off.
• Thus, in theory, those developing nations with
  abundant natural resources could eventually
  achieve take-off by exporting, reinvesting their
  incomes in wealth creation (processing,
  manufacturing and, increasingly,
  infromation/high-tech!)
• Some structuralists (those who believe in the
  core-periphery model persisting from colonial
  times), however, view natural resources in the
  post-colonial world to have been a liability for
  some nations - the so-called resource-curse
  theory.
• They use empirical data to point out how in many
  cases, being well endowed with natural resources
  has proven to be a barrier to achieving economic
  development for a given nation.

5
Reliance on single exports (one export only
would 1.0)

• Many developing nations are heavily reliant on
  one or two exports, leaving them very vulnerable
  (http//www.geohive.com/global/ec_natres.php).

(Prentice Hall Geotutor CD-Rom 1999)
6
The resource curse

• The resource curse theory is a somewhat circular,
  chicken-egg debate.
• Many resource-rich countries in the post-colonial
  world have failed to take advantage of their
  resource riches (especially in Latin America,
  Africa).
• They failed to adopt macro-economic policies that
  stimulated industry, etc., relying on resource
  earnings and little diversification.
• To maximize export revenues, governments
  overvalued their currencies (see my
  notes/posting), making imports less expensive and
  exports more expensive.

7
Resource curse consequences

• Governments routinely ran budget deficits based
  on over-optimistic estimates of future revenues
  from raw materials.
• This in turn helped create debt, siphoning
  capital from potential, growth inducing
  investment and infrastructure development in
  order to make repayments.
• The longer a country participated in the
  core-periphery relationship and resource
  export-driven economic model, the harder it
  became to get away from their reliance on raw
  materials as the sole source of income.
• There was already a legacy from colonialism of
  different nations having independently developed
  capacity in the same natural resource production
  (e.g. copper, rubber).
• Out of their own economic interests, the
  industrialized nations continued to encourage
  rapid development of raw materials and their
  exportation, creating competition and driving
  down world prices.

8
Growth without resources?

• Relatively speaking, the E. Asian success
  stories, Singapore, Thailand, Korea, etc. have
  limited resource bases (even land - i.e.
  population densities are high).
• This is also true for China please note (explains
  many foreign policy experts concerns about
  Chinas worldview).
• According to the World Bank, compared to world
  averages, per capita availability of agricultural
  land 25, grazing land 50, forests 15,
  water 33.
• Chinas massive population is a large factor in
  these numbers and is of particular concern
  relative to the long-term sustainability of
  Chinas economy, especially considering the
  environmental deterioration that is occurring.

9
Building Wealth Requires Discipline

• The newly industrialized nations short on
  resources built wealth on long-range,
  manufacture-oriented macroeconomic policies.
• Development experts raise the issue of cultural,
  geographical and historical differences that have
  been instrumental in favoring the so-called Asian
  Tigers.
• First, several have Confucian-type philosophies,
  willing to sacrifice current consumption for
  future welfare strict policies high savings,
  taxes, investments deferred demand for
  manufactures.
• Second, they could readily secure resources from
  other developing countries and from Australia.

10
Other differences about Asian NICs

• Third, they benefited from geographical locations
  close to major shipping routes and with easy
  marine access to Japanese, American and European
  markets.
• Fourth, unlike Latin America, populations were
  largely rural at the beginning, and low-paid
  workers flooded to new factories as the urban
  process began.
• In contrast, Latin Americas relatively advanced
  state of development may have hindered its
  success, since as the global market place
  expanded, nations sought to protect domestic
  industries and jobs, increasing costs, making
  Asia more competitive e.g. Argentina, at the turn
  of the century, was the worlds 3rd richest
  nation it still thinks this way according to
  observers and this is part of its modern economic
  woes).
• In Africa, many nations were hamstrung by lack of
  transport infrastructure, land-locked status,
  civil war and lack of investment in diversified
  economies.

11
Resources versus diversification

• Historical economic data has shown that the
  demand for raw materials does not grow as fast as
  the demand for consumer goods as global wealth
  increases, further accentuating the gap between
  the core and periphery.
• New technology, in theory a tool to eliminate
  borders and comparative advantages of
  resource-rich and resource-poor nations, will
  likely intensify economic power in the hands of
  industrialized nations due to the relative speeds
  at which it is adopted and changes, and the
  protectionist measures taken by the developers
  with respect to intellectual property, etc.
• Look at relative statistics on computers, phone
  lines, internet, for example the current HDR is
  full of discussions of high and bio-technology
  and its potential role in future development
  attainment.

12
A level playing field is unlikely
13
Resources and the Environment

• A move to greater environmental sustainability,
  recycling and reduction of waste, will adversely
  affect some resource-based economies (as it has
  with bauxite, copper), at least in the medium
  term because less raw materials will be needed
  and growth in demand will slow, even reverse.
• Many nations have over-tapped many of their
  renewable resources - lumber, fish stocks and
  soils - which will lead to declining production
  for many years, if not permanently.
• Environmental degradation caused by resource
  exploitation is affecting the economic viability
  of other key sectors such as tourism (e.g. coral
  reef destruction from polluted runoff) or
  biotechnology (e.g. destruction of potential
  genetic resources that would have been discovered
  in logged rainforests).