Michael L. Ross - Review Essay: The Political Economy of the Resourc... http://are.berkeley.edu/courses/EEP131/resourcecurse/RossReview.html1 of 19 11/14/2005 11:13 AMCopyright © 1999 by The Johns Hopkins University Press. All rights reserved.World Politics 51.2 (1999) 297-322 Access provided by University of California @ BerkeleyAccess provided by University of California @ BerkeleyThe Political Economy of the Resource CurseMichael L. Ross *Terry Lynn Karl. The Paradox of Plenty: Oil Booms and Petro-States. Berkeley: University of California Press, 1997, 342 pp.Jeffrey D. Sachs and Andrew M. Warner. Natural Resource Abundance and Economic Growth,Development Discussion Paper no. 517a. Cambridge: Harvard Institute for InternationalDevelopment, 1995, 49 pp.D. Michael Shafer. Winners and Losers: How Sectors Shape the Developmental Prospects ofStates. Ithaca, N.Y.: Cornell University Press, 1994, 272 pp.It is the devil's excrement. We are drowning in the devil's excrement.--Juan Pablo Pérez Alfonso, Founder OPECWe are in part to blame, but this is the curse of being born with a copper spoon in ourmouths.--Kenneth Kaunda, President of ZambiaAll in all, I wish we had discovered water.--Sheik Ahmed Yamani, Oil minister, Saudi ArabiaHow does a state's natural-resource wealth influence its economic development? For the past fiftyyears, versions of this question have figured prominently in debates over dependency theory,economic dualism, a proposed New International Economic Order, East Asia's success, and Africa'scollapse. Since the late 1980s, economists and political scientists have produced a flood of newresearch that bears on this question. There is now strong evidence that states with abundantresource wealth perform less well than their resource-poor counterparts, but there is little agreementon why this occurs.At first glance, the role of resource wealth in economic development looks like a question ofdwindling importance. In 1970, 80.4 percent of the developing world's export earnings came fromprimary commodities; [End Page 297] by 1993 it had dropped to 34.2 percent. But most of this dropwas caused by the fast growth of manufactured exports in East Asia and a handful of Latin Americanstates. Three-quarters of the states in sub-Saharan Africa and two-thirds of those in Latin America,the Caribbean, North Africa, and the Middle East still depend on primary commodities for at least halfMichael L. Ross - Review Essay: The Political Economy of the Resourc... http://are.berkeley.edu/courses/EEP131/resourcecurse/RossReview.html2 of 19 11/14/2005 11:13 AMof their export income. 1 For these countries the "resource curse" is an urgent puzzle.In this article I review efforts by both economists and political scientists to explain how the export ofminimally processed natural resources, including hard rock minerals, petroleum, timber, andagricultural commodities, influences economic growth. 2 I first summarize the evidence for a resourcecurse and review new research on the four most prominent economic explanations for the curse: adecline in the terms of trade for primary commodities, the instability of international commoditymarkets, the poor economic linkages between resource and nonresource sectors, and an ailmentcommonly known as the "Dutch Disease."I then review efforts to explain the political aspects of the resource curse--why resource-exportinggovernments seem to manage their economies so poorly. Most explanations fall into one of threecategories: cognitive explanations, which contend that resource booms produce a type ofshort-sightedness among policymakers; societal explanations, which argue that resource exportstend to empower sectors, classes, or interest groups that favor growth-impeding policies; andstate-centered explanations--including recent books by D. Michael Shafer and Terry Lynn Karl--whichcontend that resource booms tend to weaken state institutions.In the third and final section, I discuss two other explanations for the curse that might be fruitfullyexplored, but which have received little attention. The first explanation would attribute the curse tostate-owned enterprises, which typically govern resource extraction in developing states. The secondsuggests that a state's inability to enforce property rights may directly or indirectly lead to a resourcecurse. [End Page 298]From the 1950s to the 1970s, the question of resource wealth was at the center of debates betweenmainstream development scholars and their Marxist and non-Marxist critics. Since then, the study ofresource wealth and development has grown less ideological and more empirical, and the quality ofthe empirical work has improved sharply. Yet with the ideological stakes lowered, research on thistopic has grown lamentably fragmented: economists and political scientists seem to be unaware ofeach others' contributions, and political scientists are often divided by their area specialties. Onepurpose of this article is to better acquaint scholars with each others' work, and to show how recentstudies from a wide range of subfields can cast light on the special problems of resource exporters.A second aim is to compare the approaches of economists and political scientists to this issue. Sincethe 1950s economists have continued to investigate a small number of powerful explanations for theresource curse, employing better data sets and increasingly sophisticated statistical tools. Some oftheir findings are incomplete and unsatisfying; still, they contain significant results.Political scientists, by contrast, have produced scores of explanations for the resource curse and anequal number of case studies, yet have rarely tried to test their theories with either well-selectedcomparative cases or large-N data sets. Their reluctance to test almost certainly reflects theobstacles that political scientists commonly face in the developing world, where data can be poor,missing, or prohibitively costly to obtain. It may also reflect, however, a disregard for the practice ofhypothesis testing. Whatever its origins, the absence of hypothesis testing has had two lamentableconsequences: there has been little accumulation of replicable findings on the policy failures ofresource exporters; and absent the need to render their theories testable, many scholars haveneglected tasks that would help refine and sharpen their arguments--carefully defining their variables,specifying the domain of relevant cases to which their arguments apply, and
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