The Importance of Natural Resources Essay Example

Natural Resources! Everyone needs them, those who have them suffer. Wait, what? They provide an advantage to an economy, right? Well, from what I have concluded, . Successful countries exist, but most are unsuccessful. Why? Why are some countries better at handling natural resources, whilst others are not? What makes natural resources such a prized item? Why are they not enough for the populace of that nation to thrive economically? It is because leaders care about the people to the point they get elected, people lose economic creativity, and being underdeveloped, especially in colonized nations.

I knew that natural resources can have massive monetary value, and that quite a few countries had an abundance of them. I also knew that they were in specific locations, meaning that one place might need coal but has an overabundance of timber. That’s why large countries normally have more natural resources. It seems as though resources bring jobs, money and more economic stability to the region. As long as the resource is still abundant, jobs stay, so does economic prosperity.

The question still remains, why do some countries with natural resources become rich, vibrant democracies, while others have 93.3% of their urban

population living in slums like Venezuela [6]? How can humans be so inefficient with their resources? More importantly, why are leaders so inefficient? What manner of culture, upbringing and circumstance made leaders this wasteful? They have the power, after all.

The Search

I made a list of everything that didn’t add up, which coincided perfectly with what my questions were. My research question started to materialize after reviewing the questions I had. Why are some resource rich countries successful and others not? Successful is subjective, but I am trying to paint in broad strokes here. Prosperous examples are Norway, Sweden or America, whilst poor countries are like Venezuela or Zimbabwe. Russia is somewhere near the middle.

My search took around two and a half weeks. I was looking for books on this topic, as they have a significant amount of data in a small amount of space. I found this book called “The Dictator’s Handbook” by Bruce Bueno de Mesquita and Alastair Smith. They took most of their info from the excessive amount of studies relating to this topic. Granted, not many did exclusively my question, but I acquired enough data to answer the question. So many different institutions study this, yet to my shock, few seem to look at the political aspect of this instead of the economic aspect.

I needed to narrow my search, as having that much data, especially since it was hard to understand, was not a good idea. I had done research before, just not like this. So this is kind of new for me. I started by researching the countries that most would consider failure. I consulted the book I mentioned earlier along with a few academic papers over the course of a week. I read up on CIA Factbook and World Bank Group reports and natural resource distribution, checked on economic activity by region and laid that over my other maps.

Then I narrowed my question to only tackle economic, political and regional reasons. Culture probably has something to do with it, but from what I’ve seen they all value hard work and being a decent person to some extent. With that out of the way, why do countries with resources sometimes fail?

Search Results

The first interesting piece of information I found was that countries that having their biggest export income based around selling a natural resource by the CIA World Factbook have significantly lower GDP per capita than other, less resource exporting countries [1]. The Netherlands, for example, having a nominal GDP per capita of $55,185, or around 4.7 times the world average , is an economy that has very little natural resources [7]. Their biggest export is machinery and chemicals [1]. Venezuela, having a resource net worth of approximately $14.3 Trillion [5], is one of the poorest countries in the world, with a GDP per capita of around $3,168, or around 27% of the world average [7]. Approximately 96% of all Venezuelan export income comes from oil. If the market crashes, Venezuela will collapse and will have a hard time feeding its population.

The second big find is that in countries with successful economies, resource rich or not, entrepreneurship is higher that those with weaker economies, which are frequently based on natural resources [1,2,3]. They provide a lot of new products that can be sold in large markets. The more of them, the less likely the economy of a nation will crash if the timber industry collapses, for instance. Less people are entrepreneurs in resource rich countries because working with the resource is a stable, high paying job in their world. Why take a risk and make maybe $25,000 a year when the gold mine is paying workers $35,000 a year?

The next big piece of info was that rulers are not too concerned

with providing for the populace in a dictatorship [2]. Any leader worth their salt knows that “The first step in understanding how politics really works is to ask what kinds of policies leaders spend money on. Do they spend it on public goods that benefit everyone? Or do they spend mostly on private goods that benefit only a few? The answer, for any savvy politician, depends on how many people the leader needs to keep loyal—that is, the number of essentials in the coalition.” [2]. In a dictatorship, the number of people needed to keep in power is small. A few generals and businessmen, that all. To keep them happy, they need to spend just enough on them to keep their loyalty, since the populace doesn’t matter all too much if they can be put down by a general.

My fourth big discovery is that countries that are classified as low or low middle income per citizen by the World Bank Group are three times more likely to have firms bribe an official as compared to higher income places [3]. They are also four times more likely to be expected to give gifts to tax officials and two and a half times more likely to make an informal payment to a public officials [3]. According to the same report, it says that “In the worst affected economies more than half of firms experienced such requests, adding to the bureaucratic costs for businesses”. You pay me, or I hurt you. That is it. Nothing more, nothing less. Socialist/communist countries also have corruption, just not as noticeable, since their policy is all related to communism/socialism.

The final item I learned from my search is that the less developed a country by around the 1940s, the less rich it is. No matter the resources. I found that African, Southeast Asian and South American countries. Those are resource rich areas, whilst also being poor. This says that when colonized, as most of these area were [4], they received development improvements and infrastructure, as their colonizers want easy mobility with horses and carriages.

After my research, I have concluded that countries which have natural resources don’t need to pay attention to the people, because they make enough money off of taxes on that resource. This leads to corruption, which wreaks havoc on the average citizen who wants to do well in life. If a resources value falls, then places with that resource make less money. Resources also create wars over resources, destabilizing that place even more. Rich resource rich countries are so well off either because of other segments of the economy not named natural resources, because of a fund that limits losses during a price sink, or a close tie in with European, Asian or North American markets. Democracy is best for making sure the average citizen is better off, as dictators only need a small number of people, which of course they pay handsomely [2].

Socialists and communists also try to distribute wealth equally, but when wealth producers leave, they run dry on money to distribute.

Reflections On My Search

My original idea of this topic was that the answer was going to be either simple or complicated to the point where few understood. It is actually not too hard to understand, as it is just putting your own interests over others. I learned how to plan time somewhat well and how to pull data from massive publications. I learned to read books and papers that are quite tiring to examine after lengthy sessions, which I will definitely need. Revising was a skill I needed to develop from scratch. Now I can, at last, put my use politics skills to use in friendly debates, and seeing through the so often murky reality of our world. Your perspective is your truth, my truth expanded beyond a simple black and white world.


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