Based on the resource curse thesis, there seems to be an inverse relationship between the abundance natural resources and economic growth. Gelb’s (1988) cross-country economic analysis of oil exporting countries (Algeria, Indonesia, Nigeria, Venezuela, Ecuador and Trinidad and Tobago) was one of the early studies on the negative connection between natural resources wealth and economic development. The studies revealed that windfalls from natural resources during the booms periods of 1974 – 1978 and 1979 – 1981 were harmful for economic development. Natural resource like oil windfalls are subject to upswings and downswings [volatility] in prices, and this affected economic planning. Price volatility can be attributed to removal of the fixed
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They concluded that although there are no absolute inverse relationship between natural resources boom and poor economic growth, there are suggestions that natural resources boom led to slower economic growth (Sachs and Warner (1999, p. 45). Sachs and Warner (2001, p. 835) also noted an inverse relationship between natural resource abundance and export contribution to economic growth, especially from manufactured goods due to high nature of the local industrial sector. A manifestation of the resource curse is that natural resource abundance tends to render the export sectors uncompetitive, hindering a country’s export-led growth (Sachs and Warner 2001, p. 835). Because resource-abundant countries tended to be high-price economies, except for the direct contribution of the natural resource sector itself to export, these countries failed to achieve strong export led growth (Sachs and Warner 2001, p. …show more content…
The state is able to sterilise windfalls from destroying the economy and institutions by investing funds into education and diversification of the economy through procession of its diamond locally. Local procession of the diamond created some linkages to other sectors of economy as well as employment. The Samatar (1999) however, suggested Botswana’s ability to use its diamond resources stimulate economic development is complex. The country’s economic success is partly attributed to the political and economic unity of the dominant class, under a political leadership that recognised the importance of institutions and fiscal discipline (Mogalakwe 2003, p. 86). Mogalakwe (2003, p. 86) argued that Botswana's economic development can be seen as a class project that is mobilised around a social groups, nurtured systematically by its political leadership. There are other cases in some advanced natural resource rich economies with increases in GDP. Mideksa (2013, p. 277; 288) contends that on average, 20% of the annual GDP per capita increase in Norway since 1974 is due to the endowment of petroleum resources such as oil, natural gas, natural gas
They concluded that although there are no absolute inverse relationship between natural resources boom and poor economic growth, there are suggestions that natural resources boom led to slower economic growth (Sachs and Warner (1999, p. 45). Sachs and Warner (2001, p. 835) also noted an inverse relationship between natural resource abundance and export contribution to economic growth, especially from manufactured goods due to high nature of the local industrial sector. A manifestation of the resource curse is that natural resource abundance tends to render the export sectors uncompetitive, hindering a country’s export-led growth (Sachs and Warner 2001, p. 835). Because resource-abundant countries tended to be high-price economies, except for the direct contribution of the natural resource sector itself to export, these countries failed to achieve strong export led growth (Sachs and Warner 2001, p. …show more content…
The state is able to sterilise windfalls from destroying the economy and institutions by investing funds into education and diversification of the economy through procession of its diamond locally. Local procession of the diamond created some linkages to other sectors of economy as well as employment. The Samatar (1999) however, suggested Botswana’s ability to use its diamond resources stimulate economic development is complex. The country’s economic success is partly attributed to the political and economic unity of the dominant class, under a political leadership that recognised the importance of institutions and fiscal discipline (Mogalakwe 2003, p. 86). Mogalakwe (2003, p. 86) argued that Botswana's economic development can be seen as a class project that is mobilised around a social groups, nurtured systematically by its political leadership. There are other cases in some advanced natural resource rich economies with increases in GDP. Mideksa (2013, p. 277; 288) contends that on average, 20% of the annual GDP per capita increase in Norway since 1974 is due to the endowment of petroleum resources such as oil, natural gas, natural gas