Natural Resources, Country Size, and Development

Abstract

More than two decades of statistical analysis have failed to establish whether a resource curse exists. This chapter complements the statistical analyses with a nuanced political economy case study approach that recognizes the resource curse as part of a broader rent curse that can be caused by geopolitical rent, regulatory rent, and labour remittances as well as resource rent. Two rent-driven political economy models, which are exemplified by high-rent Trinidad and Tobago and low-rent Mauritius, explain the divergent growth post-1960 in five major global developing regions. This chapter argues that changes in the global intensity of the rent curse reflect policy fashions. A bias to industrialization, mainly through import substitution, proved especially ill-suited to small economies, which comprised the majority of developing economies. However, changing global technology improves prospects for balanced development by facilitating diversification into export services and productive agriculture.