All Financial Wisdom

If I could, I would choose to be born in a country without natural resources

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Are natural resources necessary for a country to be rich? If one thinks about it, all things being equal, countries with many natural resources would have a strong advantage over countries with none. Countries without natural resources could only rely on the capacity of their citizens to make a living, while countries with natural resources would also have resources to exploit. Well, in practice it doesn’t happen like that.

In fact, considering how it happens in reality, it seems that a country with few natural resources is better than one with a lot of natural resources as a country in which to live. This phenomenon is known as the “Paradox of Abundance” or the “Curse of resources.” Basically, it refers to the paradox that many countries with abundant natural resources end up having a level of development lower than the other developed countries.

In fact, sometimes even despite having abundant resources, they end up being poor. Resource curse was a term coined by economist Richard Auty in a book in 1993.

For example, the ten countries with the most oil reserves are: Venezuela, Saudi Arabia, Canada, Iran, Iraq, Kuwait, United Arab Emirates, Russia, Libya and Nigeria. In contrast, only Kuwait, the United Arab Emirates, Saudi Arabia and Canada are among the 30 countries with the highest per capita income in the world.

In fact, some places on the list of countries with oil have serious economic problems. On the other hand, other countries on that list, such as Luxembourg, Macao, Singapore, Ireland, San Marino, Switzerland, Austria, Taiwan, Denmark, Belgium or Japan are countries that stand out for absolutely no reason other than for their natural resources. What is the reason behind this?

Many aspects have been studied. For example, we speak of the “Dutch Disease,” which means that when resources are found, the currency appreciates excessively and for this reason the export capacity of the country is reduced, depending even more on natural resources. There has also been talk of the problems posed by the volatility of commodity prices.

Wakanda and Oil

But it is also true that natural resources have been shown to increase the risk of violent conflicts, the possibilities of civil war and corruption. The presence of natural resources allows them to be financed, and the corruption that resources often generate, encourages them.

Wakanda is a fictional country in the Marvel universe where much of the action of the Marvel movie takes place: Black Panther. Recently, the Foundation for Economic Education (a think tank of libertarian ideology) has published the video that accompanies these lines explaining why, although Wakanda had the vibranium, its political system (a feudal monarchy to which the king can be succeeded by a combat death and without any kind of democratic control), together with an economy dependent on a single resource (the vibranium, a metal of extraterrestrial origin) would suppose that the situation would very likely not make Wakanda a rich country.

It is true that the current T’challa monarch is a great ruler, but if he were removed or lost his mental stability, the situation would change for the worse for the inhabitants of Wakanda.

Apart from conflicts over the control of resources, it often happens that access to them is limited to those who hold power, those who bribe the powerful or their family and friends. So it is very likely that Wakanda was not the rich country that is shown to us in the film and the comics.

There are exceptions

Of course there are exceptions to this situation of countries that do not have  problems despite their abundant natural resources. For example, in the previous list of rich countries, Qatar stood out, although it does not have abundant oil reserves, it has natural gas. There is also Brunei, Kuwait and Norway, the latter has always been considered an example of how to manage oil revenues (in a nutshell: infrastructure and investment).

Other examples of countries that do well thanks to their natural resources are Canada and Australia, the second being a demonstration that it is not necessarily energy resources that are required.

In fact, historically it is spoken that the coal resources in Germany and the United Kingdom helped the industrial revolution, and that the lack of these resources in Spain caused it to arrive later.

But nowadays with global trade well expanded, I think it is not the lack of natural resources that prevents a nation from developing. In Europe and China, there is barely any oil and that doesn’t stop them from having large oil companies, plastics and cars industry on the streets and roads etc…

So, it clearly seems that natural resources are not absolutely required for the development of countries. In fact, it seems that they could even be counterproductive for their development if there is no exceptional management of them. Just look at what’s happening in Venezuela.

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