Environmental Engineering Reference
In-Depth Information
land expansion and resource degradation may be chronic in rural areas. For example,
Haiti, Lesotho, Nepal and Pakistan have 30-50 % of their populations on fragile land and
display an incidence of rural poverty of 30-70%. The Dominican Republic, India,
Jamaica and Vietnam have 20-30 % of their populations living in fragile areas and around
30-60 % of their rural populations in poverty. Only China and Mexico, and to a lesser
extent Jordan and Malaysia, do not conform very strongly to the '20-20 rule' for popula-
tion concentrated on fragile land and the degree of rural poverty.
Final remarks
The relationship between trade, natural resources and economic development is a com-
plicated one. The persistence of underdevelopment in many low- and middle-income
economies, combined with the fact that many of them remain fundamentally dependent
on primary product exports, has led to various explanations over the years attempting to
link these phenomena, from the 'unequal development' thesis of the 1960s and 1970s to
the more recent 'resource curse' hypothesis. This chapter suggests that, although such
arguments are often compelling and may have some empirical validity, they cannot
explain fully how most low- and middle-income economies fall into a persistent pattern
of resource use that is very relevant to the problem of resource degradation, poverty and
chronic underdevelopment. Resource dependence may in fact be a symptom of 'chronic
underdevelopment' rather than the cause of it. As summarized by Barbier (2005), to break
out of this pattern may be possible, but to do so requires a new development strategy in
resource-dependent low- and middle-income economies aimed at setting four long-term
goals:
1.
Reinvesting resource rents in more productive and dynamic sectors of the economy,
which in turn are linked to the resource-exploiting sectors of the domestic economy.
2.
Developing political and legal institutions to discourage rent-seeking behavior by
wealthy investors in the natural resource sectors of the economy.
3.
Instigating widespread reform of government policies that favor wealthier investors
in markets for valuable natural resources, including arable land.
4.
Targeting additional policies and investments to improve the economic opportunities
and livelihoods of the rural poor, rather than relying on frontier land expansion and
urban migration as the principal outlet for alleviating rural poverty.
Notes
1.
Auty (1993) is often credited with naming this phenomenon a 'resource curse'. However, Auty (1994) gives
credit to Mahon (1992) for also suggesting a 'variant' of the resource curse theme as an explanation of why
resource-rich Latin American countries have often failed to adopt sensible industrial policies. The resource
curse is often linked to the 'Dutch disease' effect. In the wake of the oil-price shocks of the 1970s and 1980,
'Dutch disease' models focused on the problems caused for a primary product-exporting economy by
'resource booms' that led to overvalued commodities (e.g., see Corden, 1984; van Wijnbergen, 1984). Either
the discovery of large reserves of a valuable natural resource or a boom in commodity prices will cause an
expansion in primary product exports and lead to overvaluation of the exchange rate. This will reduce man-
ufacturing and service exports that are more conducive to growth, and may also reduce total exports even-
tually.
2.
Some economists have placed greater emphasis on the revenue volatility of primary product exports, rather
than the windfall price effects of a commodity boom, as a significant factor in the resource curse (Auty 1997;
Gylfason et al., 1999). Thus Gylfason et al. (1999, p. 204) state: 'the volatility of the primary sector gener-
ates real-exchange-rate uncertainty and may thus reduce investment and learning in the secondary sector
and hence also growth'.
