PrintThe term Resources Curse (also referred to as the paradox of plenty) first entered debates about development and economics in the 1990s. In their paper titled "Natural Resource Abundance and Economic Growth", Sachs and Warner (1995) defined this term by stating that countries with an abundance of natural resources, tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources. Although it may seem intuitive that positive economic development would result from the discovery of resources within a country, it can have the opposite effect. It has been observed that there are higher rates of conflict and hegemonic practices coupled with economic instability and stunting in resource-rich countries.
Many socio-economic challenges may arise for a country as a result of resource abundance. One such challenge is the phenomena called Dutch Disease. This phenomena refers to an instance that happened in the 1960's in the Netherlands, where a discovery of a natural gas field caused temporary boom to the industry and thus created issues for other sectors of the economy. Specifically, this can be defined as a situation where other sectors within a countries economy are negatively impacted by the growth in national income from natural resource extraction. An example of this in the United States would be the oil boom that started in 2006 in the Bakken formation in western North Dakota. Ross (2015) paper titled, "What Have We Learned about the Resource Curse?", argued that out of all the resource industries, petroleum/oil was the most damaging as it promotes civil instability between classes, oversight incentives (i.e. corruption), and authoritarian regimes. This is apparent in developing, third-world countries, such as equatorial Africa, where governments are more likely to be unstable and there are large disparities between social classes.
