The Resource Curse

Fortune recently published an article entitled, “Another African resource curse? IEA says energy boom is not helping poorest.” The resource curse is something I remain skeptical about, and while this article brings about many valid points, I still believe other deep-rooted issues play more of a role in the poverty and corruption that plagues many countries in sub-Saharan Africa.

The facts of the article are definitely foreboding.  Over the past fives years, 30 percent of global oil and gas discoveries have been made in sub-Saharan Africa. Nonetheless, four out of five people in the region still use charcoal and firewood to cook their food due to a lack of electricity. It is frustrating to think that the people who live in those countries are not even using the resources that could be turned into electricity effectively, when they could also be using their resources to attract investors to boost their economy. While many may refer to this issue as a part of the curse, I think it has more to do with the government’s inability to create reforms and legislation that make using these resources easier. In the article, International Energy Agency Chief Economist Fatih Birol  said the two biggest issues Africa faces when it comes to their natural resources is lack of governance and investors. Lack of governance would definitely be an issue in the region with or without the presence of oil, and the economies in sub-Saharan Africa are not likely to be attracting anyone. These two issues are definitely connected, and without a strong government, a strong economy is unlikely to follow.

There is also an infrastructure issue that is effecting the regions ability to use its resources effectively. The article goes on to explain that there are also geothermal and other clean energy opportunities that could be used to attract investors to the area as well. But, the infrastructures in the region would first need to be updated in order to even begin attracting more investors. Again, while the article attributes this issue all to the resource curse, I see it as something completely different. The resources themselves are not causing a lack of investors; it is the lack of updated infrastructure. Either the government needs to start budgeting in order to update these infrastructures, or they could contract out to the private sector.  They could attract the private sector by offering them tax deductions for working at a lower cost.  

Most importantly, the countries in this region need to start focusing on helping themselves. The article also says that a recent study shows that $2 out of $3 in Africa is being used for export projects that are of not use to any Africans. This is a problem that goes far beyond the resource curse. The government needs to start prioritizing its own people before worrying about the goods that are being sent to other countries.  Again, the only way the government can force the private sector to invest more in companies that will help Africans is through incentives. Whether it is through tax reductions, or governments offering to give some funding to start up companies that will invest in technologies that will help Africans specifically, something needs to be done to force companies to care about the people in the countries they are working in.

Another effect of the resource curse is seen through corrupt governments. This is definitely seen in sub-Saharan Africa, where there are millions of dollars stolen in oil annually making the rich richer and the poor poorer. Governments are doing very little to stop the corruption, and it is possible that many government officials are even benefiting from the oil profits. In this case, resources are able to become a tool for the already powerful and corrupt to put the majority at an even greater disadvantage. But, the social standing of the citizens of these countries was not created by the resource curse, it was just made worse by the resource curse. This is the position I hold with the resource curse. Countries that are already unstable and have a lack of organization and government will become even more conflict ridden with the abundance of natural resources, but the resources themselves are not what causes the problem.

While the IEA report claims that if governments and policies do not change, these countries will continue down a path of civil war and corruption, the outlook is not all negative. If African countries do begin to attract investors and use their resources effectively, the IEA estimates the countries economies could be boosted by 30 percent by 2014.

Ebola and the Environment

A couple of months ago, when Ebola started showing up in headlines, I read Jake Flanagin’s New York Times article “How Environmentalism Can Help Stop Ebola”. At the time the article made perfect, logical sense to me. However re-reading the article now I am taken aback at the blame he and scientists place on the affected countries, especially Sierra Leone, for perpetuating the spread of this dangerous disease instead of examining the bigger picture.

Flanagin’s main premise is that Ebola is so widespread in these countries because of their environmental practices – or lack there of. His foremost claim is that deforestation is to blame. We now understand that the Ebola virus likely resides in animals – especially bats – in the wildlife near the effected areas. Therefore being in close contact with any wild animal is not ideal. However contact with these animals has been increasing in places like Sierra Leone because of deforestation. The United Nations Environment Program even believes its forests could disappear by 2018 (Flanagin). According to Colin Schulz of Smithsonian “as people cut down the forest or push further into the forest for mining and other work, it brings humans and animals into closer contact,” which “means more chances for viruses to jump from host to host.” So this deforestation is not only harmful for the environment, but it is causing some of the people in these countries to contract dangerous diseases like Ebola.

One crucial piece of information that Flanagin leaves out is why this deforestation is occurring on this large of a scale. Much of the deforestation in Sierra Leone has occurred because of pressure to mine natural resources such as diamonds and gold. In addition, more than half of the country is below the poverty line and civil war has been a prominent force in years past. Therefore we can conclude that Sierra Leone has what is known as the “resource curse”. The resource curse is the idea that an abundance of a natural resource inhibits economic growth, democracy, and increases likelihood of conflict. As Ross discussed in his article “Green Imperialism” the dependence on this natural resource that develops makes countries more susceptible to war through a reduction in growth and an increase in poverty. In this case it is also severely harming the environment in a systematic way. For example, because the country is so poor most do not have electricity and therefore need to cut down even more trees, along with those cut down for mining, in order to get charcoal and timber they need for every day life. But are they fully to blame for this “curse” and are there no other factors at play?

I believe a country is not solely responsible for how the resource curse affects them. While having a highly demanded resource can be a curse and partly leads to this kind of underdeveloped society, we must realize that as westerners we are the ones that make their resources in high demand. In fact a lot of blame can be put on Western people who participate in and facilitate this type of exploitation in order to reap the benefits. Mitchell argued this in his journal on Carbon Democracy stating the type of democracy America believes in is “a mode of governing populations that employs popular consent as a means of limiting claims for greater equality and justice by dividing up the common world” (Mitchell, 9). Simply put, while we boast democracy we depend on the oppression of states like Sierra Leone in order to keep our standards of living and people content.

The major issue I have with Flanagin’s argument is that he seems to make it “their problem” and even suggests that Westerners have a great interest in helping these countries. While I agree westerners do not want an outbreak of Ebola, I don’t believe we really want to change the structure of Sierra Leone because we benefit from their oppression. Looking at this argument from a more in depth view: if the Ebola epidemic can be blamed on deforestation and deforestation can be blamed on the resource curse that the west perpetuates, then is entire outbreak be blamed on us?

1. Flanagin, Jake. "How Environmentalism Can Help Stop Ebola" (2011). 

The Resource Curse and ISIS

The Resource Curse and ISIS

Jon Burnsky

            A counterintuitive consequence of being well endowed in a high profit natural resource is that these states practically always have weak and unstable governments. This has come to be known as the “resource curse.” The recent expansion of ISIS controlled land and strength has been claimed to be caused by many things, and I believe that the largest and most overlooked factors are the very same ones that cause unstable governments to pop up in all states cursed with natural resources.

            Timothy Mitchell writes in “Carbon Democracy” that the causes of the resource curse are all rooted in western demand for raw materials; in the case of the Middle East, oil.¹ Since the 1800s western powers, mostly liberal democracies, have relied on massive amounts of resources to fuel their booming, industrializing economies. Western countries that already had sufficient amounts of these resources, oil in particular, were able to grow and prosper. Countries like the U.S., Canada, and Norway were able to fuel themselves, while others like the Germany, Denmark, and the U.K. needed to get their oil from elsewhere. Oil was quickly discovered in the Middle East and just as quickly the region was colonized and all the economic interests in the area turned to the quick moneymaking business of sucking up oil to sell to the west.

            This unwavering demand from developed nations to keep their machines running made for a sure means to make money. Naturally, the people who did control the oil fields were extremely rich but constituted a small percentage of the country’s citizens. Governments in the Middle East became accountable only to this rich oil-owning class. Whoever controlled the oil controlled the money in the country.

            ISIS gained initial support as an ideologically based Islamic state that would fight against all forms of foreign intervention and restore a theocracy in Syria and Iraq. ISIS calls for redrawing borders that would actually keep ethnic groups together and separate from others with whom they have historically quarreled. Like many other groups in post-colonial nations, the initial motivator is bringing together ethnic groups that were split up by colonial powers and kicking out unwanted groups that have been forced into the same state.

While this could start to look like ISIS gained power by convincing or coercing people in the region simply using this ideology, their funding is what actually makes them legitimate. Because of the weak governments caused in part by the nature of oil-rich countries and in part by the civil war in Syria, ISIS was able to quickly take control of oil fields and smuggle out oil in enormous quantities. ISIS controls 11 oil fields and one oil field that produces 75,000 barrels a day was captured by ISIS early on.² ISIS then sells the oil at discount prices, “$25 to $60 for a barrel of oil that normally fetches more than $100 — but their total profits from oil exceed $3 million a day…”²

            ISIS is a key example that states well endowed with natural resources cannot have stable democratic governments so long as there is demand for that resource. So long as the world runs on oil, any militant or authoritative regime that controls oil fields will get rich and further corrupt or simply supplant the government in place. The instability in the Middle East as well as other countries that are said to have the resource curse is caused not by the resources themselves or even the governments but instead by the market established by the western world.

¹ Mitchell, Timothy. “Carbon Democracy: Political Power in the Age of Oil”

² Mroue, Bassem. “Here's A Breakdown Of The Oil Assets ISIS Now Controls”

http://www.businessinsider.com/breakdown-of-the-oil-assets-isis-controls-2014-9#ixzz3GkmuuwKR

GMO’s, Mono-crops, and the Developing World

GMO’s, Mono-crops, and the Developing World

                Should developing nations embrace genetically modified crops and highly mechanized resource intensive agricultural methods to help them provide more food for their people and produce for export? Such a decision would need to account for ecological, cultural, and political realities. Unless it does so the likelihood of realizing the desired gains will likely be very small or in a more likely scenario the result will be detrimental overall rather than beneficial.

                Ecological conditions in a country are very important when deciding to adopt input intensive methods of agriculture. If a country has poor soil, low levels of precipitation, or only a small amount of land that is arable the success of input intensive methods of agriculture will likely be low. Shiva goes on to explain that in such instances more food can be produced by diversifying the number and types of crops that are produced. This makes sense because mono-cropping is likely to provide only one aspect of nutritional needs when consumed and the argument that the mono-crop can be sold on the market for money that can be used to purchase food is often more readily stated than accomplished. The reason the mono-crop is less likely to be sold is that the amount of it produced will not likely be large enough to warrant exporting if it is only grown on small plots of land. However, if a country is ecologically well endowed with strong levels of precipitation, good soil fertility, and a large amount of arable land the likelihood of success increases. Such a country will not need to purchase as much of the various inputs like fertilizer and water which will reduce initial capital requirements which would otherwise frustrate the efforts of poor rural farmers. Furthermore, with a large amount of land available for agriculture it would be more probable that enough of the mono-crop would be produced to be exported for income. It is worth noting that if mono-cropping and resource intensive agriculture are adopted the country will need to diversify its market because more and more land will be farmed by fewer farmers because each farmer will develop the capacity to farm larger tracts of land and will want to acquire more land in order to increase their revenue.

                Cultural conditions are also important because local customs and preferences may contribute to consumption patterns that do not support a demand for genetically modified crops like corn and soybeans. Shiva also addresses this by mentioning that female food producers in India have a wealth of knowledge about the variety of plants that they grow and consume. This heavy investment in a variety of crops will make them less willing to transition to completely new foreign crops. This could be the result of a lack of preparation knowledge or simply a preference for another crop. Additionally there is the possibility that some countries are hesitant to adopt genetically modified organisms for religious or social reasons which have everything to do with culture and nothing to do with the viability of the crops in their country.

                Politics and policy also play an important role in determining the viability of genetically modified mono-crops is developing countries. First off it is possible that the political climate of the country is hostile to western ideologies which will likely reflect harshly on the image of western developed GMO’s. Additionally as a result of social and cultural pressures it is possible that government officials will adopt policies that are hostile to GMO’s and mono-cropping. One of Paarlberg’s arguments was that African countries were actually deferring to European tastes and preferences when they chose to keep GMO’s out. He goes on to explain that European tastes don’t suit Africa because African people are starving and can’t afford to be picky like rich countries. Furthermore it is likely that developing countries are being encouraged to liberalize and devalue their currency. When the country liberalizes it enters the world market and unless the country has a comparative advantage over other producers and exporters it is likely to lose out. This is especially true when the export is a mono-crop that is produced to such a large degree that it must frequently be destroyed or farmers must be paid to not harvest it in order to keep prices high enough to make it profitable. Why should a poor country that is trying to make money start producing a crop that only makes money thanks to government subsidies in other more developed nations who will not import because they already have a surplus? Liberalization is likely to destroy the local agricultural sector regardless because local farmers will not be able to compete with global prices which means money will flow out of the country as consumers purchase more imports rather than into it via exports. Devaluing currency is designed to help mitigate this by reducing the cost of goods that are exported from the country, however the goods that are likely to be exported are not agricultural goods because as mentioned earlier there is a surplus of agricultural goods in the global market which keeps prices very low already.