Various and sundry thoughts on Political Science, Alaska, backcountry skiing, kayaking, and facial hair.
Monday, August 31, 2009
Naím on the resource curse.
This is good stuff. This notion--that resources can be a curse on poor nations--is a classic and important idea in the political economy of development.
6 comments:
Victoria B.
said...
We discussed the same thing in my SE Asia class. The Philippines and Burma both have extensive natural resources, but they were left out of the 'economic miracle' that Singapore and Malaysia enjoyed. Furthermore, Malaysia has lots of rubber, while Singapore is too small to have much of anything. Thus Singapore = 1st tier economic giant and Malaysia = only 2nd tier
For a country to manage their resource wealth effectively, they need to have a strong and stable political system in place before extracting the natural resource. Norway the 7th largest producer of oil had a strong political system in place prior to discovering their oil. Norway, for example, has enjoyed tremendous wealth distributed to the entire nation. There are not many really wealthy people in Norway, nor are there many very poor people. Developing countries should follow by example.
Finding an alternative resource is an impossible strategy right now. Humans in todays societies have a really bad dependency on oil. This dependency has lead to corruption in smaller undeveloped countries that are being taken advantage of with natural resources. These countries need to put their money into working on an import/export system so that when their natural resource runs out they are left with devastated land and unmanageable economy.
Poor, resource rich countries do need to diversify their exports, but the burden must lie primarily on developed countries to provide an incentive for change. Whether it’s the diamond mines of Sierra Leone or the oil wells in the Middle East, the government, institutions, and income inequality present allows those in power to reap enormous benefits from exporting a single product. If countries highly dependent on imported oil decrease their dependence it will force oil-exporting nations to expand their market, thereby diversifying their exports, and hopefully setting them up for a more stable economy in the future.
This article describes Friedmann's Core-periphery theory. This theory basically states that core nations (developed nations) exploit the periphery nations (underdeveloped, poor nations) for their natural resources such as oil. This is not the situation for all wealthy nations that import resources from poorer nations it is a widespread phenomenon. Alleviating exploitation of impoverished nations is an interesting problem. In economics class today we talked about how all trade in a market based economy is voluntary in the sense that the trade makes each party better off. Therefore, the current exploitation or trading with poor nations is improving their situation. Those this may be true, I feel that there needs to be policy changes in order to reduce exploitation and make trading more beneficial to the poor nations.
Gains from trade increase overall welfare, and in a free market both countries would indeed be better off: however, the welfare gained is a net effect. Within a single country, one group will benefit and the other will suffer, the benefits just outweigh the costs. Those who benefit from trade in underdeveloped, unstable countries are most often those in power. So while total welfare will increase, it is distributed only among those who need it least, and are likely to use it to remain in power and stifle economic growth in any other sector, thereby stunting what could evolve into a more stable economy. I would argue that even though a country experiences gains from trade, it is not necessarily better off.
6 comments:
We discussed the same thing in my SE Asia class. The Philippines and Burma both have extensive natural resources, but they were left out of the 'economic miracle' that Singapore and Malaysia enjoyed. Furthermore, Malaysia has lots of rubber, while Singapore is too small to have much of anything. Thus Singapore = 1st tier economic giant and Malaysia = only 2nd tier
For a country to manage their resource wealth effectively, they need to have a strong and stable political system in place before extracting the natural resource. Norway the 7th largest producer of oil had a strong political system in place prior to discovering their oil. Norway, for example, has enjoyed tremendous wealth distributed to the entire nation. There are not many really wealthy people in Norway, nor are there many very poor people. Developing countries should follow by example.
Finding an alternative resource is an impossible strategy right now. Humans in todays societies have a really bad dependency on oil. This dependency has lead to corruption in smaller undeveloped countries that are being taken advantage of with natural resources. These countries need to put their money into working on an import/export system so that when their natural resource runs out they are left with devastated land and unmanageable economy.
Poor, resource rich countries do need to diversify their exports, but the burden must lie primarily on developed countries to provide an incentive for change. Whether it’s the diamond mines of Sierra Leone or the oil wells in the Middle East, the government, institutions, and income inequality present allows those in power to reap enormous benefits from exporting a single product. If countries highly dependent on imported oil decrease their dependence it will force oil-exporting nations to expand their market, thereby diversifying their exports, and hopefully setting them up for a more stable economy in the future.
This article describes Friedmann's Core-periphery theory. This theory basically states that core nations (developed nations) exploit the periphery nations (underdeveloped, poor nations) for their natural resources such as oil. This is not the situation for all wealthy nations that import resources from poorer nations it is a widespread phenomenon. Alleviating exploitation of impoverished nations is an interesting problem. In economics class today we talked about how all trade in a market based economy is voluntary in the sense that the trade makes each party better off. Therefore, the current exploitation or trading with poor nations is improving their situation. Those this may be true, I feel that there needs to be policy changes in order to reduce exploitation and make trading more beneficial to the poor nations.
Gains from trade increase overall welfare, and in a free market both countries would indeed be better off: however, the welfare gained is a net effect. Within a single country, one group will benefit and the other will suffer, the benefits just outweigh the costs. Those who benefit from trade in underdeveloped, unstable countries are most often those in power. So while total welfare will increase, it is distributed only among those who need it least, and are likely to use it to remain in power and stifle economic growth in any other sector, thereby stunting what could evolve into a more stable economy. I would argue that even though a country experiences gains from trade, it is not necessarily better off.
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