Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Economics, Finance, & Analytics
  • Economic Analysis & Monetary Policy

Resource Curse (Economics) - Explained

What is the Resource Curse?

Written by Jason Gordon

Updated at April 24th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is the Resource Curse?How the Resource Curse Occurs?Resource Curse ExampleAcademic Research on the Resource Curse

What is the Resource Curse?

The resource curse is a situation where a country that enjoys an abundance of natural resources (non-renewable natural resources such as fossil fuels) has little or no economic growth and is economically unstable. This situation connotes a nation that is plenteous in natural resources suffering amidst the abundance. The resource curse is a paradox, it is sometimes called the 'Dutch disease' or 'the paradox of plenty.' As depicted by the resource curse, countries with enormous natural resources have less democracy and are highly undeveloped than countries with limited natural resources. Such countries also face conflicts, political challenges, and economic difficulties.

Back to:ECONOMIC ANALYSIS & MONETARY POLICY

How the Resource Curse Occurs?

The resource curse does not just happen to countries, it is as a result of certain actions by these countries. Usually, it is observed that when a country makes a major natural resource discovery, such a country tends to focus all it has on the mining of the natural resource to the extent that other aspects of the economy suffer. When this happens, the economy becomes more volatile and becomes poorer or less economically stable, despite the surplus of non-renewable natural resources. When a country fails to diversify its economy but only focus on mining natural resources, the resource curse can take effect. The curse thrives when the government fails to realize that a new industry such brings economic growth when other industries are also harnessed. There are certain ways countries attempt to break the resource course, for instance, countries like Russia, Venezuela, and Saudi Arabia have begun to develop new strategies to strengthen their economy rather than being dependent on natural resources.

Resource Curse Example

The resource curse is commonly called the Dutch disease, given certain happenings and activities in the Netherlands after a major natural resource discovery took place. When natural gas was discovered in the Netherlands, the economy focused only on this newly found industry at the expense of other existing industries. When this happened in the Netherlands, many skilled workers and experts were moved from different sectors to focus on the natural gas sector, the economy became largely undiversified, which had an overall negative effect on the economy. Therefore, despite the discovery of natural gas in the Netherlands, the country was economically unstable and was under the resource curse until it was able to scale through.

Related Topics

  • Porter's Diamond
  • Physical Capital
  • Human Capital
  • Capital Deepening
  • Infrastructure
  • Staple Thesis
  • Resource Curse



resource curse

Was this article helpful?

Yes
No

Related Articles

  • Diseconomies of Scale - Explained
  • Relative Purchasing Power Parity - Explained
  • Market Failure - Explained
  • Engel's Law - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand