The natural resources trap and poverty in the world's poorest countries

Natural Resources: The Leading Development Trap

This paper argues that the natural resources trap is the main cause of poverty among billions of people in the poorest countries in the world today.

Paul Collier (2007 p 4), in his famous book, Bottom Billions, thoroughly explores and discusses the causes behind the grueling poverty of a billion people in the poorest countries. At the outset, he narrows down the Millennium Development Goals of the United Nations into tracing the development progress of countries up to this year. This has led to the realization of a billion rich people in separate developed countries against five billion in separate under-developed, developing or non-developing countries. That horrid contrast reflects the 80% of humanity that lives in these stagnant countries and poses the true challenge to all development efforts everywhere. The author emphasizes that these people in these countries are not only "falling behind" but also "falling apart." He lists four causes, which he calls "traps," as behind this grim reality. And these are the conflict trap, the natural resources trap, being landlocked with bad neighbors trap, and the bad governance trap. He loosely describes traps as "black holes" or deterrents, into which these unfortunate countries are drawn rather than towards success or growth, which is their shared target with successful or rich countries. By now, about 1 billion of the world's estimated 6 plus billion people are in these traps and about 70% of them live in Africa (Collier p 4).

The Traps

The first, the conflict trap, is characterized by wars, chiefly civil wars (Collier, 2007 p 17; Durairaj, 2015 web p 1). These are almost always the consequence of low income, slow economic growth and development, and a high-level of dependence on basic exports. Civil war is not only a consequence of this trap but also the cause of other misfortunes like reduced economic growth, placed at 2.3% per annum by international experts. About 73% of these affected people have been experiencing civil wars in recent years. The second, the natural resources trap, is ironically plentiful in these countries where the economy is stagnant or deteriorating. And about 29% of these people live in those areas with rich natural resources. The third, the bad governance trap, is endured by 76% of these people, their suffering resulting from poor economic policies of bad governance. Uplifting their condition requires opportunities. But opportunities are not possible when government policies are poor or bad. And the fourth trap, that of being landlocked with bad neighbors, is the plight of 30% of these people who suffer from scarce resources. A more unfortunate prognosis for those in landlocked countries is that their condition is likely to be long-term. Overall, growth is needed to overcome these traps. If growth exists in these countries, it does only for a scanty number. Yet growth must benefit ordinary people, the majority, the mainstream in order to prod the economy (Collier p 11, Durairaij web p 1).

The billions of poor people at the bottom of the economic ladder in the world may be trapped by conflict due to frequent strife and civil wars. They may be down there because of poor governance with poor government policies that do not provide opportunities for growth. Their being landlocked with bad neighboring countries, put them at the mercy of their economically stronger neighbors. They must come to terms with the requirements of these more fortunate neighbors. The fourth cause, the natural resources trap, thus appears to be ultimately the biggest among them.

Most Devastating

Prosperity is the dream of all and the promise of exploiters as well. Worse, it is the chief cause of all the other traps. People wallowing in poverty are accustomed to think or made to believe that discovering and tapping their country's natural resources for the world market is their passport to poverty or growth (Kruse, 2008 web p 1). What they are unaware of, or are made unaware of, is that a poor country with a national economy fueled by the production and sale of its rich natural resources is instead stifling their own economic growth. As a consequence, it leads to, or enhances, the three other traps (Kruse web p 1).

For a poor country to grow or prosper but has no marketable natural resources to export or development aid to bolster it, it must first improve its overall conditions (Kruse, 2008 web p 1). Its domestic economy must be promising enough already in order to attract trade with other nations. Trading means that this poor country has products that these other nations will want to buy or import from it. At the same time, it must already have a skilled labor force of sufficient size to work on the products for trade. It must already have invested in the needed technology that will cope with the quality of production demanded or desired by potential traders or buyers. And behind this should be a stable, growth-supportive government and policies, which will set the evolution of economic development into motion (Kruse web p 1).

Moreover, this poor country, which is promised prosperity out of its natural resources, is also almost always subject to weak or corrupt governance (Kruse web p 1). A government with these characteristics is often influenced or controlled by the elite of that country, which is often a minority. This minority is capable of controlling the production and export of whatever valuable natural resource on which the promise of prosperity and growth is premised. This elite actually calls the shots. When the deal succeeds, this small number gets the biggest share of the proceeds. Ordinary people do not. Some members of this elite minority may decide to share their wealth and distribute part of it to the people but only to relieve them or reduce discontent. But the rest do not possess this characteristic and resort to coercion or the sway of power to suppress protests in order to retain their possession of these natural resources (Kruse web p 1).

Some of these poor countries attempt to address the problem by nationalizing the natural resource industry through democratic processes (Kruse, 2008 web p 1). But this option triggers power struggle among various poliical factions, which all want to control government forces and influence policy. But politicians give out more to the people in consideration of plans to win in the next election. This is the downside of democracy in a poor country. An autocratic country will provide proper investments on its natural resources on long-term. Politicians in a democratic but poor society or country often make senseless investments in ignore valuable or legitimate ones for the sake of winning in an election or retaining their current positions (Kruse web p 1).

Collier writes that poor countries, which are richly endowed with natural resources, can actually and tragically be driven to slow growth (The Economist, 2008 web p 1). About less than 1/3 of these bottom billion people lives in countries whose economies are dependent on these natural resources. It is not only ironic and tragic but also risky for these countries economically and politically. They become at-risk for the "Dutch disease." This condition was coined from the incident of the discovery of natural gas in the North Sea. It fortified the Dutch currency and raised the prices of Holland's manufactured exports. This made their natural=resource wealth less competitive. A similar experience occurred in Nigeria, which could have profited from labor-intensive production the way it did in the cases of China and India. But Nigeria's natural resources pushed labor-intensive production down, making the Nigerian economy dependent on fluctuating natural-resource production (The Economist web p 1).

Natural-resource wealth is not conducive to a healthy political culture, either (The Economist, 2008 web p 1). When there is enough money to in the state to offset the imposition of taxes, voters turn lax and less vocal about their concerns and opinions. Natural resources enchant patrons because these resources bring in a lot of money. When it falls into the hands of patrons and the economy becomes dependent on these recourses, prices fluctuate and the government can and often does turn un-democratic (The Economist web p 1).

In addressing the natural resources trap, Collier elucidates on the imposing government restraints, such as effective checks and balances of power (Kruse, 2008 web p 1). He specifies the role of press freedom in bringing this reform about. He describes the kind of democracy that a poor but resource-rich country as itself ineffective in fuelling economic development. There will be strong incentives to compete for elections but not to establish and impose restraints. These restraints do not serve personal motivations because it serves the public good. Wealthy nations with traditional government restraints experience less of these difficulties. But hen their economy collapses, restraints are imposed on people of higher economic status. Collier is convinced that the natural resources trap is not limited to poor nations. But it is nonetheless more devastating to them than to wealthy nations (Kruse web p 1).

Solid Actions

Collier (2007 p 175) repeats the irony that many of the billion people at the bottom of the development hierarchy are actually resource-rich but economically and policy-poor. Wealthier countries providing aid to finance these poor countries' natural resources are admirably compassionate but very sadly overlooking the point. Their trade policy does not offer much potential for uplifting aided poor countries. These countries will simply and eventually find it difficult to diversify their exports as illustrated earlier by the Dutch disease in Holland. This will occur despite trade preferences. Military assistance may be needed at different times because resource-rich countries are hot places for conflict. But the real assistance or intervention they need is in the form of laws and international norms. A charter for resource wealth is an example. It may be he revised version of the Extractive Industries Transparency move. Its downside is the tendency to disregard it as a difficult initiative in some countries. It was first tried in Angola bu was dismissed as something too pessimistic (Collier p 179).

The Extractive Industries Transparency initiative and the Kimberley Process both prove that even small steps can be valuable (Collier, 2007 p 179). And those who reject them out of habitual skepticism offered no better alternatives. They remained convinced that the chances of helping and turning the fate of a badly-governed bu resource-rich country were nil. Serious reformers cannot be empowered to help these billion people at the bottom by this viewpoint. We can be sure that the massive forces of globalization will proceed to side with the enemies of growth in these poor countries. We must thus convene abilities to offset this connivance (Collier p 179).

Collier (2007 p 182) also stresses that aid is double-edged as regards exporting for natural-resource-rich countries. He calls attention again to the Dutch disease risk that it creates. It has been tested. The solution to this major trap seems to be a big and hard push that a large but temporary aid can do towards raising poor countries' export infrastructure to the global level of competition. He repeats that the aid must be temporary. It must be only once because the Dutch disease also stops when the aid stops. Smart technical assistance like a big-but-just-temporary-and-once-time aid for exporting of natural resources for poor countries would be sufficient to create the needed environment and transformation. Aid can provide the needed technology for the reform. Other than this, nothing can suffice (Collier p 182). This paper concludes that the natural resource t rap is the major reason behind the poverty among the people in those countries.