The Resource Curse? Mineral Rents and the Financing of Social Policy - An UNRISD Seminar

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Natural resource wealth and successful development do not always go hand in hand. Many countries with abundant mineral, land or forest resources are actually low- or lower middle-income countries with high poverty rates, low human development and sluggish growth. Even with booming commodity prices, doubts linger about the potential for mineral-rich countries to achieve more sustainable development outcomes. This phenomenon is often referred to as the paradox of plenty or the resource curse.

But why does it appear to be a disadvantage to base an economy on extractive industries or commodity production? History has shown that many of today’s developed countries initiated, developed and sustained their economic and social development on just such a basis.

Lessons from UNRISD research show that development performance is not simply linked to resource endowment but is the outcome of more complex processes of “employing” resources. Much depends on the conditions in which resources are harnessed and the ways in which they are brought into increasingly globalized markets. What constrains development lies not in what countries have, but rather in what they lack: institutions, financial leverage, human capital, appropriate policies and a favourable global context.

Key questions

• Is the use of mineral revenues to fund social policy a viable strategy for promoting inclusive development in poor, resource-rich countries?
• How can mineral-rich countries best combine economic and social policies in their development strategies?
• What can the international community do to support development processes in mineral-rich countries?

This seminar presents findings from an UNRISD inquiry recently published as Mineral Rents and the Financing of Social Policy: Opportunities and Challenges (Palgrave Macmillan, May 2012).The inquiry systematically analysed the relationship between mineral wealth and revenues, social policy decisions and social development outcomes in developing countries. Through thematic papers and case studies it shed light on the question of why some developing countries are more successful than others in harnessing the development potential of their natural resources. The inquiry further explored the conditions that are likely to contribute positively to democracy, social inclusion and economic development in mineral-rich countries and drew on case studies from Botswana, Chile, Indonesia, Nigeria and Norway.

Speakers

Samuel Asfaha, Economist, International Training Centre of the ILO, Turin
Alfredo Calcagno, Head, Macroeconomic and Development Branch, Division on Globalization and Development Strategies, UNCTAD, Geneva
Katja Hujo, Research Coordinator, UNRISD, Geneva

Podcasts and Videos