Do Natural Resources
HUMAN GEOGRAPHY:
POSTER 3
Limit Global Economic
Development?
Fears that shortages of natural resources might
halt economic growth have given way to concern that
an abundant endowment of natural resources retards
economic development (see glossary for an explana-
tion of the terms in bold type). In fact, neither fear is
grounded, provided sound policies are pursued.
Many scholars came to believe that technological
progress would prevent natural resources from
becoming a constraint on world economic devel-
opment. When interest in the economic growth of
developing countries increased after the Second
World War, natural resources played almost no role
in growth models. Rather, capital investment was
believed to be the engine of growth and techno-
logical change would increase the productivity of
capital so that economic growth could proceed
indefinitely. Consequently, low investment was seen
as the cause of global poverty, which foreign invest-
ment and aid could overcome, allowing poor coun-
tries to catch up with the rich ones.
geography@lancaster
However, sharp increases in mineral and petroleum
prices in the early-1970s, together with publication of
the Club of Rome report, ‘Limits to Growth’, triggered
a review of the natural resource constraint on
growth. ‘Limits to Growth’ argued that scarcity of
minerals and arable land would limit growth over the
coming decades, while pollution threatened life-sup-
porting environmental resources over the long-term.
Although this thesis was widely criticised and its pre-
dictions about mineral and land shortages were soon
refuted, concern that pollution prevents sustainable
global economic development strengthened during
the 1980s.
The extent to which pollution is linked to economic
growth is a subject of current debate
Department of Geography
The Theory
GDP per capita
Quantity Index
Pollution
Incentives to Cleaner and more
protect the efficient technologies
environment adopted in response
introduced
The Practice: GDP and emissions in OECD countries
200
GDP per capita
150
Index (1970=100)
Nitrogen Oxides
100
Sulphur Oxides
50 Particulates
0
Lead
1970 1975 1980 1985 1990
Figure 1 Environmental Kuznets Curve (EKC)
Evidence began to emerge in the 1990s of an Envi-
ronmental Kuznets Curve (EKC) that suggests that
as GDP per capita rises the intensity of key pollut-
ants declines, so that pollution might be de-linked
from growth (Figure 1). The EKC is attributed to
increased concern over pollution in the richer coun-
tries leading to policies to restrict pollution emission
and impose the costs of damage on polluters,
thereby encouraging adoption of pollution-abating
technology. In addition, the emergence of the knowl-
edge or ‘weightless’ economy reduces the relative
importance of the more pollution-intensive agricul-
ture and manufacturing sectors in economic develop-
ment. However, many scholars remain unconvinced
that pollution can be de-linked from growth and they
favour stricter controls on environmental emissions.
A second concern about natural resources and
development is how resource abundance affects
development. An abundance of natural resources
should accelerate economic development because it
increases exports so that more capital goods can be
imported to build up the economy and also because
the natural resource rents (returns in excess of
those required by an efficient producer) can be used
to boost capital investment. Yet since the 1960s the
resource-poor countries have grown faster than the
resource-rich countries and overtaken them in terms
 HUMAN GEOGRAPHY:
POSTER 3 1200
Resource rich
1000
GNP per capita (US$)
800
Resource poor
600
400
200
0 labour so that labour shortages cause wages to
1960 1965 1970 1975 1980
Figure 2 Divergent PCI 1960-97: Resource-Rich and
Resource-Poor Developing Countries
of GDP per capita (Figure 2). Moreover, since the
mid-1980s GDP per capita growth in the developing
countries has been inversely related to the share
of natural resource rents in GDP (Table 1). Nature’s
gift of natural resource abundance has been a curse
rather than a blessing.
There are two main reasons for the superior perform-
ance of the resource-poor countries in recent dec-
ades. The first is that resource-poor countries have
been more likely to foster developmental political
states that possess both the autonomy to pursue
coherent policies and the aim of raising the welfare
of the entire population. The second reason is
that resource-poor countries diversify earlier than
resource-rich countries do into competitive manufac-
geography@lancaster
turing and this brings high, and more importantly,
efficient, investment.
A competitive industrialisation model summarises
the development of many resource-poor countries
like South Korea, Singapore and Mauritius. Limited
scope to expand exports of primary products causes
resource-poor countries to embark on competitive
industrialisation at a low level of GDP per capita.
Low wages mean that the manufacturing is labour-
intensive, much of it for export and this triggers vir-
tuous interlocking economic and social circles that
sustain rapid and equitable economic growth. Limited
resource rents also mean that the government faces
stronger incentives to generate wealth by promoting
efficient economic growth rather than by abusing its
Table 1 Share of rents in GDP 1994 and GDP growth 1985-97, by natural resource endowment
Resource Endowment
Resource Poor1,2
Large
Small
Resource Rich
Large
Small, non-mineral
Small, hard mineral
Small, oil exporter
All Countries
Source: Derived from World Bank (1999)
1 Resource-poor = 1970 cropland/head < 0.3 hectares
2 Large = 1970 GDP > $7 billion
power to capture the natural resources rents.
Early and rapid industrialisation accelerates urbani-
sation and speeds the demographic cycle. Popu-
lation growth therefore slows and the number of
dependants (children and pensioners) that each
worker supports falls so that saving and investment
increase their share of GDP. Exposure to global com-
petition sustains the efficiency of investment so per
capita GDP can double each decade. In addition,
labour-intensive manufacturing absorbs surplus rural
1985 1990 1995 rise. This encourages economic diversification into
more skill-intensive and capital-intensive industry
that can better afford to pay an increasingly expen-
sive and productive workforce. Competitive diversifi-
cation also strengthens the economy’s resilience in
difficult times.
Meanwhile, the labour shortages put a floor under
the wages of the poor and help maintain relatively
equitable income distribution. This together with early
urbanisation and passage through the demographic
cycle accelerates the build-up of social capital (insti-
tutions that foster trust), which further boosts invest-
ment efficiency.
In contrast, resource-abundant countries rely on
primary product exports for longer than resource-
poor countries and this breeds predatory gov-
ernments and delays competitive industrialisation.
Resource abundance allows governments to win
immediate political support by capturing the rents
and using them to create employment in protected
industry or government service, which use labour
and capital inefficiently. Competitive industrialisation
is thereby postponed and this retards urbanisation
and the demographic cycle so that each worker must
support more dependants and saving increases
slower. Worse, investment efficiency falls, as the gov-
ernment must squeeze more and more rent from
farms and mines to support the burgeoning pro-
tected industry and bureaucracy. Meanwhile, the
absence of labour-intensive manufacturing for export
causes surplus rural labour to persist and this
increases income inequality and social tensions. In
this way, the resource-abundant economy becomes
locked into a staple trap in which parasitic industry
PCGDP growth Total rent Pasture and Mineral rent
1985-97 (%) (% GDP) cropland rent (% GDP)
(% GDP)
4.7 10.56 7.34 3.22
2.4 9.86 5.41 4.45
1.9 12.65 5.83 6.86
0.9 15.42 12.89 2.53
-0.4 17.51 9.62 7.89
-0.7 21.22 2.18 19.04
15.03 8.78 6.25
 HUMAN GEOGRAPHY:
POSTER 3 CASE STUDY:
Natural Resources and Conflict in Angola

The abrupt withdrawal of Portuguese settlers CONGO City/ town

when Angola achieved independence in 1975 DEMOCRATIC
Diamonds
halved economic output and ushered in a period REPUBLIC Petroleum
Cabinda
of civil war funded by global powers. The end of OF THE 0 100 200 km
M'banza CONGO
the Cold War in the late-1980s cut such funding Soyo Congo
0 100 200 miles

but the conflict persisted because the two sides

Uíge
had access to natural resource rents. Angola illus-
trates how, in the absence of a developmental Luanda Lucapa
N'dalatando
political state, natural resource rents may exacer-
bate economic and social malaise, encouraging Malanje Saurimo
violent contests for political power.
Angolan oil reserves were estimated at 5.4 bil- Atlantic Sumbe
Ocean Luena
lion barrels in 2000 and the country produces
11% of the world’s diamonds. The main oil fields A N G O L A
Benguela
lie offshore so they are protected from guerrilla
activity and easily controlled by the government
in Luanda. However, the oil rents, which reached Lubango Menongue ZAMBIA
40% of GDP in the 1990s, nurtured a predatory Namibe
political state that enriched an urban elite even
as it mismanaged the economy and impoverished
the vast majority of the population.
In these circumstances, the availability in remote NAMIBIA
eastern Angola of a second source of natural
resource rents, alluvial diamonds, sustained a A rebel offensive in 1992 captured 70% of Ango-
military challenge to the unpopular government. lan territory and gave control of 90% of the coun-
Alluvial diamonds are easily extracted and trans- try’s diamond production, leaving just Cabinda
ported and the rent may comprise 60-90% of and the coastal strip in government control along
the value. This high value/weight ratio facilitated with some of the provincial capitals. However,
diamond smuggling into the international market the rebel forces also supported themselves by
geography@lancaster

earning the rebels $600 million annually in the using forced labour in farming and by extortion.
mid-1990s. This sapped the loyalty of its natural supporters,
namely those alienated by the Luanda govern-
ment. The resulting heavy reliance on diamonds
rendered the rebels vulnerable when the global
community tightened surveillance of diamond
exports in the late-1990s.
Such greed-driven conflict may follow a distinc-
tive pattern in which rival groups initially fight
each other to establish a local monopoly of power
that permits the desired level of resource looting.
Once the monopoly is established, neither group
may gain from achieving peace. However, greed-
driven wars collapse when starved of funding and
Oil drilling platform do not appear to carry a high probability of re-igni-
off the Angolan tion, in contrast to conflict that is driven by griev-
coast ance that may echo across generations.

and bureaucracy siphon revenue from the primary
sector whose competitiveness and relative impor-
tance both wane as government policies blunt incen-
tives. The result is a growth collapse as occurred
in most resource-rich countries after the mid-1970s
(Figure 2) including Venezuela, Brazil, Nigeria, Saudi
Arabia, Zambia and the Philippines.
couraging predatory political states so that coherent
economic policies can be pursued that not only
sustain rising incomes but also curb environmental
damage.
Glossary

However, this relationship between natural resources
and the type of political state is not always a
deterministic one. A handful of resource-abundant
countries including Botswana, Chile, Malaysia and
Indonesia spawned developmental governments. In
such cases, the longer reliance on primary products
merely postpones competitive industrialisation. The
key to successful development therefore lies in dis-
Key terms that may be new to you and are important
in the context of understanding economic develop-
ment:
Capital investment is the sum invested annually in
order to replace worn out production facilities and
also to increase the productive capacity of the econ-
omy. The rate of capital investment typically first rises
 and then falls during the course of economic devel-
HUMAN GEOGRAPHY:
POSTER 3 opment, and it is typically within the range of 15-25%
of GDP (total output) annually.
Developmental political states combine sufficient
authority to pursue a coherent economic policy with
the aim of increasing welfare throughout society.
Many developing country political states fall short in
one or both of these criteria.
GDP per capita is the total net annual output of all
goods and services produced by the economy (gross
domestic product) of a country, divided by its popula-
tion. It provides a crude indication of differences in
relative income/ welfare between countries.
Natural resource rents are the surplus revenue
after deducting all the costs of production of the
natural resource, including a risk-related return on
the capital invested. Such rents are positively associ-
ated with very fertile soils and easily accessible min-
erals, for example. They can be regarded as a ‘free
gift’ from nature because production would continue
even if the entire rent was taxed away from the
producer by the government.
Natural resources include land, forest, fisheries,
minerals, energy, water and air.
OECD: The Organisation for Economic Co-operation
and Development is a grouping of countries compris-
ing about thirty of the world’s richest economies.
geography@lancaster
Predatory governments have little concern for pro-
viding public goods and incentives to facilitate invest-
ment in welfare-enhancing improvements for the
population at large. Rather they abuse their political
power to capture natural resource rents and other
rents in order to increase their own wealth and that
of their supporters, often resulting in corruption and
economic collapse.
Productivity of capital refers to the efficiency with
which capital is invested. For example, the productiv-
ity of capital was many orders of magnitude higher
under the developmental political states of East
Asian ‘miracle’ economies like Taiwan and South
Korea compared with that under predatory states like
those of Angola or pre-1983 Ghana.
Weightless economies emerge when there is a
decline in the relative importance of agricultural
and manufactured goods in generating income. This
occurs in the more advanced economies and cor-
responds to a rise in the importance of ‘weightless’
transactions involving knowledge processing and
provision.
Further Reading
Auty, R.M. (2001) (ed.) Resource Abundance and
Economic Development, Oxford: Oxford Univer-
sity Press.
Meadows, D.H., Meadows, D.L., Randers, J. and
Behrens, J.W. (1972) The Limits to Growth, New
York: Signet.
World Bank (2000) Greening Industry: New Roles for
Communities, Markets and Governments, Wash-
ington DC: World Bank.
Useful websites
World Bank (environment):
http://www.worldbank.org/environment
OECD (sustainable development):
http://www.oecd.org/
World Resources Institute:
http://www.wri.org/
© Lancaster University April 2002
Department of Geography
Lancaster University
Lancaster
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