Resource Rich Does Not Mean Economic Prosperity

Last week, The New York Times “discovered” Afghanistan is not a barren war-torn wasteland without natural resources that American public opinion suggests, but rather poised to become “the Saudi Arabia of lithium.”

Lithium is a scarce metal used to produce electronics.  It has value to many growing nations, especially China and the United States.

The details surrounding the “discovery” do more than make a reader raise an eyebrow.  In the Times article, an adviser to the minister of mines proudly proclaims “This will become the backbone of the Afghan economy.” One should be hesitant to trust declarations made by this branch of the Afghan government; as the Wall Street Journal notes, “the Mines Ministry has long been considered among Afghanistan’s most corrupt government departments.”   This is not to question the likelihood of minerals in Afghan hills.  Rather, it is fairly well-known that the country is abundant in natural resources. In 2007 the Bush Administration concluded “that Afghanistan was potentially sitting on a goldmine of mineral resources and that this fact ought to become a central point of U.S. policy in bolstering the government.” The potential to exploit the natural resources of the country were also widely known to the Soviets decades earlier.

There is a widely held belief that countries with abundant natural resources have greater chances to succeed economically.  This belief was made famous by Jared Diamond in Guns, Germ and Steel. But as Dambisa Moyo explains in Dead Aid:

Africa’s broad economic experience shows that the abundance of land and natural resources does not guarantee economic success however.  In the second half of the twentieth century, natural resource dependence has proved to be a developmental curse rather than a blessing.

Last week’s Planet Money on the issue, goes in to greater detail about the curse and is well worth a listen.  Hopefully, the world will watch as Afghanistan decides how to spend the valuable resource and the money will be given fairly to the country.  But as Bolivia and Nigeria have recently proven that is not the case.

Having resources without the political integrity and ability to properly manage the country will do little for the development of Afghanistan.  This is especially the case for a country with very powerful vested foreign interests.

Perhaps, the announcement is meant to play more to the American public perception that investing in Afghanistan is a worthy endeavor than economic revitalization of an opium dependent economy.  Whatever the case, Afghanistan’s leaders must approach this valued commodity with caution and learn from the resource cursed nations that have proceeded it.

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1 Comment

Filed under Foreign Policy

One response to “Resource Rich Does Not Mean Economic Prosperity

  1. I agree the Planet Money piece is brilliant. I particularly enjoyed the interview with one economist who said, “oh [bleeped], this is real trouble for Afghanistan.”

    The resource curse isn’t automatic but I guess I would not be optimistic in this case. Some of the linkages between resource management and conflict can be glimpsed by looking at cases where conflict has been averted. Botswana’s success in managing diamond wealth can partly be explained by good macro-economic policy decisions, but it is important to recognise that these decisions were underpinned by a stable political settlement, unusually favourable world market conditions and effective private property institutions. Zambia, in contrast, managed a sharp influx of wealth quite badly yet did not succumb to violent conflict, largely as a result of its resilient central state. Resource management strategies alone do not explain the onset or recurrence of violent conflict. In each case, conflict is driven by a complex array of institutional, historical and political factors.
    http://iddbirmingham.wordpress.com/2010/07/01/afghanistan-and-the-resource-curse/

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