Resource curse

The “resource curse” refers to an ongoing debate about the role a country’s endowment of resources, such as minerals and oil, plays in its rate of economic development. The possible existence of a resource curse and how it can be avoided are important issues in the development of resources globally.

Definition

The resource curse is the term used to describe the fact that countries with large endowments of resources have often tended to develop more slowly economically than countries with small endowments of resources. This behavior is the opposite of the expected, traditional view that abundant resources are an important aid in a country’s economic development.

Overview

The belief that an abundance of resources is a major advantage for a country's economic development has been widely accepted. However, there is an opposing view based on the comparison of the rate of economic advancement among developing countries. The comparison shows that countries with large endowments of resources have tended to develop at slower economic rates than countries without such endowments in resources. This type of situation has become known as the “resource curse.” The resource curse is considered a particularly likely problem for a country with a large endowment of a nonrenewable resource, such as minerals or oil, that leads to an export-oriented industry that is large relative to the country’s domestic economy.

Several arguments are made to explain why the resource curse might occur. In general, exporting natural resource products is less desirable than manufacturing. Natural resources tend to have declining prices relative to manufactured goods over time, and natural resource markets are very volatile, with large swings in prices. A second argument is that the presence of a large, export-oriented resource industry, often operated by foreign companies, can severely damage a country’s economy by taking workers (higher wages) from crucial domestic sectors and raising domestic prices (inflation). This is referred to as the “Dutch disease” after the impact of a large natural gas find on the economy of the Netherlands in the 1960s. A third argument points out that the profit that does go to the country for its resource development is often wasted through corruption or current consumption and is not invested in the country to replace the value of the resources being used up. It can also lead to civil unrest as different groups in the country fight for a share of the wealth. The resource constraints of developing countries further contribute to these problems.

Ultimately, the debate is not about the value of resources in a country’s economic development but about how well a country uses the resource wealth it has been given. Countries with large resource wealth often are unable to use it wisely for economic development and may misuse it to the point that overall economic development is hindered. It does not have to be that way, as shown by Botswana, which used its diamond industry to support strong economic development and stability. However, history shows that care must be taken when a country has major reserves of an in-demand resource to avoid the resource curse. While Botswana avoided the resource curse in the early twenty-first century, its economy remained heavily reliant on diamond exports several decades later, increasing its risk of the curse.

Some experts warned that this curse may begin to evolve as demand for critical minerals like lithium, cobalt, and rare earth elements increases to support emerging technologies and renewable energy. Shifting from a focus on traditional commodities and internal governance, the modern resource curse involves a complex nexus of geopolitical competition with environmental, social, and market vulnerabilities.

Bibliography

Braunstein, Juergen, and Marina Chuchko. “Resource Curse in the Age of Critical Minerals: Geopolitical Forces and Market Maturity.” Energy Research & Social Science, vol. 127, 2025, doi:10.1016/j.erss.2025.104247. Accessed 25 Nov. 2025.

Elbra, Ainsley. Governing African Gold Mining: Private Governance and the Resource Curse. Palgrave Macmillan, 2016.

Fernando, Jason. "Resource Curse: Overview and Examples." Investopedia, 6 Sept. 2025, www.investopedia.com/terms/r/resource-curse.asp. Accessed 25 Nov. 2025.

"How Botswana Has Avoided the Resource Curse." The Borgen Project, 30 Nov. 2023, borgenproject.org/avoided-the-resource-curse. Accessed 25 Nov. 2025.

Lashitew, Addisu, and Eric Werker. "Are Natural Resources a Curse, a Blessing, or a Double-Edged Sword?" Brookings, 16 July 2020, www.brookings.edu/articles/are-natural-resources-a-curse-a-blessing-or-a-double-edged-sword. Accessed 25 Nov. 2025.

Menaldo, Victor. The Institutions Curse: Natural Resources, Politics, and Development. Cambridge UP, 2016.

Patrick, Stuart M. "Why Natural Resources Are a Curse on Developing Countries and How to Fix It." The Atlantic, 30 Apr. 2012, www.theatlantic.com/international/archive/2012/04/why-natural-resources-are-a-curse-on-developing-countries-and-how-to-fix-it/256508. Accessed 25 Nov. 2025.

Ross, Michael L. The Oil Curse: How Petroleum Wealth Shapes the Development of Nations. Princeton UP, 2013.

Shaffer, Brenda, and Taleh Ziyadov, editors. Beyond the Resource Curse. U of Pennsylvania P, 2012.