This paper will explore the resource curse thesis, an idea which theorises a nations abundance in resources will generate poor overall economic development in less developed countries. The resource curse explains this idea by proposing minerals and fuels in great abundance equal restriction in growth in the form of state intervention and significant cases of rent seeking and corruption. The general consensus on these cases is a negative one in terms of overall development and the long-term development their consequently result in. In this paper there will be specific and detailed focus on Latin American countries exploring how valid the resource curse thesis is and if it is hard evidence for the outcome of countries such as Venezuela and Colombia
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This period was when the majority of Latin America solidified their mark and links with the entire world trade (Engerman, 1997). Those countries in Latin America which had a superiority in state capacity posses this superiority today too — this may be due to ‘Dutch Disease’ according to Sachs and Warner (1997, 2001) formulated a theory to explain the lacking economic growth of the Netherlands; granted the nation had the discovery of North Sea oil (Runnschweiler, 2008). The theory speculates that a sudden influx and boom from a natural resource may cause a country’s exchange rate (Runnschweiler, 2008). What this entails is that exports manufactured by the resource rich country become less competitive. Basically, manufacturing exports are the symptom of growth while resource exports are quite the opposite which leads Dutch Disease theorists to conclude that resource booms such as in Venezuela retard growth in development. However, there really is not much evidence for the Dutch Disease theory as trade effects in most cases according to Ross (2005), have little to no significant effects on the ability of economic increase regressions, little empirical evidence stands as concrete. When you look at the overall concept of Dutch Disease it is very similar to the overlying concept theorised in the resource curse thesis, more resources = less development, obviously the dutch disease is flawed in many ways and as it is so similar to the resource curse thesis, why should this thesis be taken as fact without doubt of scepticism? It
This period was when the majority of Latin America solidified their mark and links with the entire world trade (Engerman, 1997). Those countries in Latin America which had a superiority in state capacity posses this superiority today too — this may be due to ‘Dutch Disease’ according to Sachs and Warner (1997, 2001) formulated a theory to explain the lacking economic growth of the Netherlands; granted the nation had the discovery of North Sea oil (Runnschweiler, 2008). The theory speculates that a sudden influx and boom from a natural resource may cause a country’s exchange rate (Runnschweiler, 2008). What this entails is that exports manufactured by the resource rich country become less competitive. Basically, manufacturing exports are the symptom of growth while resource exports are quite the opposite which leads Dutch Disease theorists to conclude that resource booms such as in Venezuela retard growth in development. However, there really is not much evidence for the Dutch Disease theory as trade effects in most cases according to Ross (2005), have little to no significant effects on the ability of economic increase regressions, little empirical evidence stands as concrete. When you look at the overall concept of Dutch Disease it is very similar to the overlying concept theorised in the resource curse thesis, more resources = less development, obviously the dutch disease is flawed in many ways and as it is so similar to the resource curse thesis, why should this thesis be taken as fact without doubt of scepticism? It