nature is the boon to humanity article
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The distribution of natural resources is heavily skewed in favour of a few lucky countries. Did I say lucky? Well, that’s the received wisdom. But what is the reality? Is possession of natural resources an unmitigated blessing? Not quite!
Natural resources translate into greater prosperity for the country — imagine Saudi Arabia without its oil resources! But does possession of natural resources have any implications for the course of political development in a country? The question acquires importance not only from the perspective of political rights of the people in these countries but also of countries hoping to secure sources of raw material. The best of contracts are useless without political stability.
Unfortunately, while a great deal of work has been done on the income effect of resource windfalls, there is very little research on the political consequences of such windfall.
A recent NBER paper tries to bridge this gap. It looks beyond generic income changes associated with resource windfalls to the political consequences of such windfalls. Natural-resource booms, typically, translate into direct windfalls in the hands of political elites. But compared to other sources of income shocks, they have very different political consequences.
An abundance of natural resources can shape political outcomes, say the authors. Indeed, political developments in Venezuela, Nigeria, Saudi Arabia and many other resource-rich countries cannot be understood without reference or without attributing a central role to these countries’ natural wealth.
However, the mechanism through which natural-resource abundance affects politics is far too complex. It certainly does not allow simple generalisations. That is evident from the fact that resourcerich countries span the entire political range and display great variation when it comes to political systems as also political stability. Saudi Arabia and Nigeria, for instance, show a strong tendency towards autocracy but the former is extraordinarily stable while the latter has experienced nine successful coups since independence (and many unsuccessful ones)