Resource Curse

“The resource curse is a theory in political science, economics, and international relations positing that an abundance of easily obtainable natural resources may in fact encourage internal political corruption, underinvestment in domestic human capital, and a decline in the competitiveness of other economic sectors, thereby actually hurting prospects for growth and democratization.” That is the definition at Wikipedia of a phenomenon that has been observed on an international basis. A Google search of the word turns up 2,540,000 mentions of the phrase.

The resource curse is why countries like Saudi Arabia, Iran, Nigeria, Venezuela and other resource rich countries that should be among the richest in the world are often bogged down with corrupt, top-heavy regimes that have a very small upper class, a tiny middle class and an increasingly restive lower class that often feels disenfranchised. The lack of political freedom in these often repressive regimes only adds to the frustration of many of its citizens.

While we don’t have the political issues in the USA of these repressive regimes, my travels throughout the USA have shown regions of our country that have gone thru booms and busts due to a reliance upon their natural resources rather than upon the “brain resources” of their citizens. Too often they’ve looked upon an oil, ag or mining boom as the norm rather than an aberration. Rather than taking advantage of the windfall from the resource boom, too many of these regions have let it slip through their fingers. Later they look back, wishing that they had done something differently.

The economy in 2006 and historically high prices of a number of commodities, offers another chance for some of these regions in the USA to reinvest their sudden windfall into their “brain bank.” If you are in one of these resource booms, what are you doing to leverage your sudden resource riches?