The this can be explained through the concept

The resource curse is a paradoxical situation in which
countries that have stagnant economic growth or even economic decline i have an
abundance of natural resources that once extracted could create enough wealth
for sustained development. The resource curse can be said to occur once a state
concentrates its main focus and investments on a singlular industry, which
therefore leads to other major sectors being neglected (Manaldo,Victor).This
essay will discuss the validity of this statement and whether or not countries
in the global south can overcome the negative connotations of the resource
curse, to economically develop to a standard comparable to the ‘Eurocentric
ideal’. I shall discuss the concept of the global south and debate its use as a
term for modern academics, comparing the states of Botswana, Sierra Leone and
Nigeria.

Once a state concentrates efforts into one industry the
nation becomes overly dependent on the price of commodities, leaving the
overall domestic product to become increasingly volatile. This adds to pressure
on governments when an income distribution framework isn’t always established
in a society leaving the management of the resources and wealth open to abuse
and corruption. According to the theory of the resource curse, economies that
are resource abundant tend to grow at a slower rate and are more likely to
experience conflict and instability this can be explained through the concept
of ‘Dutch disease’. A concept developed from the Netherlands experience with
the changing price of commodities. In which when they found a large source of
natural gas in the North Sea, caused consequences to their economy. (The Political and Economic Challenges of Natural Resource
Wealth, 2015)

There are five stages of Dutch disease: the discovery stage;
when a nation finds a natural resource reserve, then economic focus and
development turn this into a high-income sector, this then allures worker’s
from other sectors to transfer over, increasing wages and depreciating the
states currency, this in turn leads to a decline in other sectors particularly
manufacturing.

The main issues therefore are how can a nation develop using
natural resources in a way that is economically sustainable? and to what extent
do we call a nation ‘developed’? The issue with the resource curse and the
terms ‘global south’ and ‘global north’ creates a divide between what
westernised cultures believe a state should resemble and what the reality is for
majority of the world. This is an example of Methodological nationalism which
stems from underestimation of the polarising nature of capitalist development.
This idea should be taken into context  the colonial history of a state and how the
power relations interact with states and neo-colonialism.

Notable theories concerning the idea and formulation of the
resource curse and its impact on countries in the ‘Global South’ is firstly the
concept of a Rentier state. Which was proposed by Hossein Mahdavy in 1970
whereby a state derives a substantial portion of it’s revenues from the rent of
natural resources to external clients. Therefore, in these resource rich
rentier states there is a potential threat to the development of civil society.
Hence why theorist’s such as Luciani and Beblawi feel the inherent nature of
rentier states provides an explanation of the presence of authoritarian regimes
seen in these resource rich states.

Characteristics of states that are resource abundant are
lower budget deficits, higher flows of foreign direct investment and lower
rates of inflation however they are also associated with a high energy
intensity, a distortion of domestic prices, and  weaker institutions. Another notable theory is
the Prebisch-Singer hypothesis, which points to a tendency of a decline in
price of primary goods compared to manufactured goods. Suggesting the share of
primary goods in the gross domestic product diminishes due to technical
processes. The PSH hypothesised that revenue windfall gains from high commodity
prices are only temporary and threaten the stability of macroeconomics. Therefore,
countries that rely on the primary sector have to grow at a decreased rate
compared to economies relying upon secondary or manufacturing industries. Prebisch
recommended states should temporarily close their economy and invest in
developing their manufacturing industries. However, there is little evidence to
prove his hypothesis since it doesn’t hold for all primary goods.

Conlude
theory and debate idea!

 

The correlation between energy dependence and
authoritarianism is clear. Larry Diamond a professor at Stanford university
considers the 23 countries that derive at least 60 % of their exports from
natural resources such as oil and gas do not have a state democracy, instead
falling under a communist regime or loosely structured dictatorship.

An example of this is Sierra Leone atypical example of a
country deemed to be in the global south and experiencing one of the worst
economies in the world, with a GDP per capita of $496 annum and over 87% of the
population living in absolute poverty. Which can be explained through the resource
curse theory (World Bank,2018)

Sierra Leones notable involvement with the slave trades and
intrastate conflict stems from the original colonialization and the fuel of the
‘blood diamonds’. The resource curse burdens Sierra Leone through the wealth
generated from Dimond mining being used to fund civil wars, corruption and
increasing violence.  With the revolutionary
united front (RUF) misplacing these funds for use to buy weapons, armour, and
briberies. The impact of the resource curse of sierra Leone has contributed to
the rising of the extremist leader Foday Sakob who’s regime influenced by
Al-Qaeda created a military coup overthrowing the government, this group was
only permitted to carry out these atrocicites through the exploitation of the
diamonds mines, by 2002 the united nations stepped in and helped disable the
group but however over 4 million people were killed in its civil wars and the
country has been left in economic decline. If the revenue from the Dimond mines
had been properly managed and invested sierra Leone could have seen
developments that benefited their communities and economic standing. This is an
example of how the resource curse can  create an atmosphere that can negatively
impact the political agenda of a state and how this creates inherent poverty
for its people. (Maconachie, R, & Binns, T 2007)

Furthermore, another considerable example of how the
resource curse theory is accountable for negative impacts in the global south
is how the oil industry has created conflict and increased food insecurity in
Nigeria. Nigeria’s curse isn’t diamonds but oil. After discovering major oil
reserves near the Niger delta terrorist groups such as Boka Haram and the
‘MEND’ Movement For The Emancipation Of The Niger Delta emerged claiming the
reasoning behind their rebellions was that the government didn’t care about
their communities and allowed improper mining of oil with ill regards for
miners safety and village security as justification. This is because the oil
has polluted their towns and rivers devastating the fishing industry which was
the main livelihood for millions of people. since Nigeria’s is one of the
largest economies in Africa, with a GDP per capita of $5900, over 10x more than
sierra Leone this has not contributed to a reduction in levels of poverty and
still 60% of people work in the agricultural industry which is reliant on
imports, low inflation and is vulnerable to shock commodity pricing.

 

On the other hand the focus of this essay is how the
resource curse can be seen to be contradictory and ambiguous, states with an
abundance of resources can reap the potential benefits resulting in a
well-balanced state. Botswana formally the British protectorate of Bechuanaland
can be said to have avoided the resource curse and disproved the theory to an
extent. Since they have had over 5 decades of civilian leadership, implemented
progressive social policies and with significant capital investment have created
one of the wealthiest states in Africa, considering their population is 60x
larger. Botswana has a comparable GDP per capita to that of Mexico at approximately
$17,500 per capita. This is an exponential growth seeing that Botswana was once
one of the 25 poorest countries in the world and has risen to rank in the top
100 by 1998. (Transparency international)

 

So, the question that arises is how did Botswana escape the resource
curse and ensure their growth is sustainable? Its argued that Botswana
implemented a three-pronged approach to economic security to manage its abundance
of natural resources. Firstly, pursuing economic diversification to avoid the
danger of overreliance on the mineral sector which is prone to shocks from the
world market and to protect its self from reliance on a non -renewable resource
that will eventually run out so they considered it beneficial to diversify into
other sectors to create a wealth that could be sustained. Secondly, they
divested revenues to protect against fluctuations relating to the price of diamonds
on the world market. Lastly the government has invested surplus revenues for
the benefit of the future generations. Furthermore, according to Limmi the success
of Botswana in its defeat of the resource curse lies in good governance, which
has enabled a stable political system. Acting on 4 main aspects of governance
such as accountably of the management of natural resources, effective government
control that upholds its own fiscal rules, market friendly regulation to
support industries and anticorruption polices that enable the government to be accountable
for their actions and ranks them as one of the least corrupt in the world
according to the transparency international organisation.

This focus has ensured their decision-making processes concentrates
on long term sustainable goals. Resulting in a state that appears to have ‘beaten’
the resource curse to an extent, especially considering the size of the human
capital in Botswana and its poor physical infrastructure.