Sustainable development in Africa
Nathaniel Thomas
The resource curse refers to countries who underachieve despite having affluence in natural resources. It is also known as the paradox of plenty, referring to areas with an abundance in natural resources (such as oil and natural minerals) which end up having worse negative economic outcomes, e.g. slower economic growth and increased political instability, compared to other countries who lack natural resources (Sachs 1995). Various factors may lead to this outcome, including corruption and the misallocation of natural resources. This paradox is more prolific in African countries, for example, Sierra Leone and Nigeria, nations which possess large amounts of oil and diamonds but despite this have still struggled regarding economic insecurity, corruption and a lack of development (Ross 2012). This essay will explore how these resource-endowed regions can avoid the pitfalls associated with the resource curse and achieve sustainable development. Firstly, it will explain in more detail what the resource curse is and how it affects Africa. Secondly, it will examine strategies to avoid the resource curse, supported by economic concepts and diagrams, and provide real life examples of these strategies. Thirdly, it will discuss several case studies of previous successes across the world. Finally, it will discuss whether these two countries can avoid the pitfalls associated with the resource curse and, if so, how they may go about doing so. The resource curse has several political and economic factors, especially in African regions. One economic factor is known as the ‘Dutch Disease’ . This is when a country receives a massive influx of revenue from their natural resources which leads to an appreciation in their currency, making key job sectors like manufacturing and agriculture decreasingly competitive (Auty 2001). An imbalance like this can lead to over-dependence on exports, which in turn leaves the economy vulnerable to price fluctuations and inflation. This can be illustrated on an AD/AS diagram with an dramatic increase in exports leading to a dramatic increase in aggregate demand causing an outward shift to right on the demand curve. This shift causes the price level to increase. The level of dependence on exports will decide how much the price level will increase by. Nigeria has previously faced economic tension due its reliance on oil. Rapid increases in oil prices have led to significant impacts on their real GDP/ national income (Mehlum 2006). As well as economic instability, the resource curse can also lead to poor governance and increased corruption. Many African nations with large amounts of natural resources experience corrupt political ‘elites’ , who exploit the resources for their own personal gain, reduceing the incentive to invest in other economic sectors within the country (Collier 2010). For example, in Sierra Leone, due to the abundance of diamonds, a brutal civil war occurred from 1991 to 2002 which tragically claimed over 50,000 lives and displaced 2,000,000 people – a form of forced migration. This was due to various groups competing for control over this precious resource without a stable government (Humphreys 2007).
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