Combating the Resource Curse: An Alternative Solution to Managing Mineral Wealth

Abstract

Countless studies document the correlation between abundant mineral resources and a series of negative economic and political outcomes, including poor economic performance, unbalanced growth, weakly institutionalized states, and authoritarian regimes across the developing world. The disappointing experience of mineral-rich countries has generated a large body of scholarship aimed at explaining this empirical correlation and a list of prescriptions for combating the resource curse. The most popular solutions emphasize macroeconomic policies, economic diversification, natural resource funds, transparency and accountability, and direct distribution to the general population. The success of these solutions has been limited because they either presuppose strong state institutions, which are widely absent in the developing world, or assume state ownership over mineral wealth and thus the need for external actors to constrain the state. At the same time, domestic private ownership is rarely proposed and often maligned. Yet, in some countries, it would serve as a more viable way to avoid the resource curse by fostering institutions that more effectively constrain state leaders, encouraging them to invest in institution building, and enabling them to respond more successfully to commodity booms and busts. he race to find new sources of petroleum has been ongoing since commercially viable oil was discovered in Titusville, Pennsylvania in 1859. Almost a century and a half later, the discovery of new oil wealth in several parts of the world, including Azerbaijan, Kazakhstan, East Timor, Chad, and Sudan has muffled increasingly popular cries that world oil production would