Some ideas for giving emerging economies a fighting chance against the resource curse.
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Among the many frustrations in development, perhaps none looms larger than the "resource curse." Perversely, the worst development outcomes--measured in poverty, inequality, and deprivation--are often found in those countries with the greatest natural resource endowments. Rather than contributing to freedom, broadly shared growth, and social peace, rich deposits of oil and minerals have often brought tyranny, misery, and insecurity to these nations. Fortunately, as my colleague Terra Lawson-Remer points out in a new CFR memo, all is not lost. There are concrete steps the international community can take to help break this curse
First, a few facts. The correlation between energy dependence and authoritarianism is clear. "There are twenty-three countries in the world that derive at least 60 percent of their exports from oil and gas and not a single one is a real democracy," observes Larry Diamond of Stanford University. There are numerous hypotheses to account for this correlation, as I note in my book, Weak Links: Fragile States Global Threats and International Security. Most obviously, easy resource revenues eliminate a critical link of accountability between government and citizens, by reducing incentives to tax other productive activity and use the revenue to deliver social services effectively. The same revenues also generate staggering wealth that facilitates corruption and patronage networks. Together, they consolidate the power of entrenched elites and regime supporters, sharpening income inequality and stifling political reform. The history of the oil-rich Arab Middle East has long been a case in point--with Saudi Arabia being exhibit A.