Di John, Jonathan. "Is There Really a Resource Curse? A Critical Survey of Theory and Evidence". Global Governance, Vol.17, No.2 (2011): 167-184.

Di John, Jonathan. "Is There Really a Resource Curse? A Critical Survey of Theory and Evidence". Global Governance, Vol.17, No.2 (2011): 167-184.

• Despite a number of positive potential effects of a high-value commodity resource base for economic growth, most literature on resource-rich developing countries had emphasized the existence of a 'resource curse', which depresses economic development (167-168).
• One theory for why nature resources do not translate into economic success blamed the economic recession on Dutch disease, a condition which results when cash flow from resource export affects exchange rates and makes exports noncompetitive. This process can potentially result in deindustrialization, which has severe long-term consequences for the economic wellbeing of a nation (169).
• Deindustrialization should not be considered a necessary result of Dutch disease, however, since policies of industrial subsidization can forcibly reallocate revenue from resource exports to develop or protect industrial sectors of the economy (170).
• Political economists have attempted to explain the poor economic performance of resource-rich states in terms of the model of rentier states. They argue that political relations are affected by economic structure, and that economies dependent on commodity export result in corrupt and unrepresentative government because control of the state and associated wealth can be easily obtained without reference to the general population (170-171).
• In addition to the general effects of corruption, rent-seeking behavior tends to decrease growth because funds from both commodity and non-commodity growth are subject to informal rents which reduce profit without investing that wealth in the economy (172).
• The rentier state model fails to explain significant divergence between rentier states, including some resource-rich states with significant economic growth. Moreover, even basic assumptions like corruption resulting in lower growth rates are incorrect, as corrupt rentier economies sometimes produce high growth rates (172-173).
• Examinations of rentier states also suffer from a crippling selection bias in study design, as they tend to pick countries known for corruption and mineral wealth. The dependence of many early states, included the USA and Australia, on mineral wealth, is ignored, as these states became successful and experienced high rates of growth (175-176).
• The revenues from natural resources can be extremely beneficial for the fiscal health of developing states, however it needs to have the state infrastructure to capture that revenue. Export of commodities without significant legal taxation does result in negative effects without any benefit to long-term economic prospects (176-178).
• Successful resource-rich states also need to have a strong sector of the economy based on non-commodity exports. This sector can benefit from the revenues of commodity exports, and is important in advocating for redistributive policies to counter the negative effects of Dutch disease (178-179).
• Balancing a dual-track system of economic growth is usually necessary for the political and economic viability of a resource-rich state. The political class in many resource-rich states has a system of economic interests which demand subsidies and favoritism at odds with the common good. Successful development programs must encourage dual growth in both the productive entrepreneurial sector and growth in the political powerful, but unproductive, subsidized sector (179).
• "The proposition that oil abundance induces extraordinary corruption, rent-seeking, and centralized interventionism, and that these processes are necessarily productivity- and growth restricting, is not supported by comparative or historical evidence" (180).