The resource curse is a paradox in which countries with an abundance of natural resources, such as oil, gas, and minerals, tend to have lower economic growth and worse development outcomes than countries with fewer natural resources. This is because the presence of abundant natural resources can lead to several problems, including:
- Dutch Disease: This occurs when the exploitation of natural resources leads to an appreciation of the country's currency, making other sectors of the economy, such as manufacturing and agriculture, less competitive in international markets. This can lead to a decline in these sectors and an overall slowdown in economic growth.
- Corruption: The presence of abundant natural resources can create opportunities for corruption, as government officials and businesses may seek to profit from the exploitation of these resources. This can lead to a lack of transparency and accountability, which can further hinder economic growth.
- Instability: The presence of abundant natural resources can also make a country more vulnerable to political instability and conflict, as different groups may compete for control of these resources. This can lead to civil wars, coups, and other forms of political violence, which can further damage the economy.
- Over-reliance: A country that relies too heavily on natural resources for its income is vulnerable to price fluctuations and changes in global demand. When prices fall, as they often do, the country's economy can suffer. This can lead to economic instability and social unrest.
- Environmental degradation: The exploitation of natural resources can also lead to environmental degradation, such as deforestation, pollution, and climate change. This can have negative impacts on human health and well-being, as well as on the country's long-term economic prospects.
Russia is a prime example of a country that has been affected by the resource curse. Despite its abundant natural resources, Russia's economy has underperformed compared to other countries in the region. The country has been plagued by corruption, political instability, and economic stagnation. In recent years, Russia has also been affected by the decline in oil prices, which has further weakened its economy.
