Joseph E. Stiglitz, Nobel laureate in economics and professor at Columbia University, has some sobering thoughts for Ghana, Uganda, Tanzania, and Mozambique; countries which have recently been in the news because of discoveries of natural resources.
Stiglitz says resources often turn out to be a curse for the particular country instead of a blessing and that most countries with abundant oil, gas or minerals will catch the Dutch disease – where a boom in extractive industries leads to declines in other sectors of the economy.
Writing in Slate Stiglitz says the “economic ingredients of the curse are well-known”:
- Resource-rich countries tend to have strong currencies, which impede other exports;
- Because resource extraction often entails little job creation, unemployment rises;
- Volatile resource prices cause growth to be unstable, aided by international banks that rush in when commodity prices are high and rush out in the downturns (reflecting the time-honored principle that bankers lend only to those who do not need their money).
- Moreover, resource-rich countries often do not pursue sustainable growth strategies. They fail to recognize that if they do not reinvest their resource wealth into productive investments above ground, they are actually becoming poorer. Political dysfunction exacerbates the problem, as conflict over access to resource rents gives rise to corrupt and undemocratic governments.