POLA90 – Lecture 8 (March 6)
Democratic Republic of Congo
Why the DRC?
Large…(as large as Western Europe or the USA east of the
Mississippi and the 3 rdlargest state in Africa)!
4 largest population in Africa at 67 million – but low
Well endowed…(coltan, cobalt, copper, timber, gold,
diamonds, uranium, etc)!
A country with a very recent violent past, beginning with a (i)
struggle against Mobutu‟s dictatorship, (ii) moving towards a
protracted internal civil war - especially in the resource-rich
Eastern provinces - exacerbated by state collapse, and (iii)
descending into a regionalized pillage-oriented conflict –
sometimes called Africa‟s World War…
Debating the Causal Validity of the Resource Curse:
Resource curse: when having resources is worse for the
country than not having them.
o Similar to Collier‟s resource trap.
Three Basic Questions to ask:
o Is an abundance of natural resources bad for growth
o If so, what causes this “resource curse”?
o How can the “resource curse” be overcome?
Early Development Thinking
Initially, natural resources thought to be an unmitigated asset
Key challenge of many post-colonial states was to accumulate
enough investment capital to not only promote economic
growth but also to promote economic independence from the
o Capital and resources were seen as good in theory and
Modernization theorists (W.W.Rostow) also argued that
natural resources were essential in providing the capital to
promote the transformation from „underdevelopment‟ to
o Import Substitution Industrialization
Present Development Thinking
An abundance of natural resources can have a negative effect
on economic growth and development An abundance of natural resources can have a negative effect
on political development – hurting processes of democratic
transition and consolidation
o Its not the resources themselves that are the problem,
but the link between resources and wealth with politics
and power could be the problem.
An abundance of natural resources can contribute to the
breakdown of states and the onset of civil wars
o Correlation between natural resources and poor political
Yet….what are the causal mechanisms linking these things?
Are they clear????
The Resource Curse and Economic Development
Lots of statistical proof that shows a strong correlation
between an abundance of natural resources and slower rates
of economic development
Comparisons of growth rates across Africa
between resource rich and resource poor
Comparisons of per capita income levels across
the globe of resource-rich and resource-poor
Resource-rich countries had poorer economic
performances in agricultural and manufacturing
Dutch Disease: an economic problem
Large amounts of oil and mineral wealth were
often associated with higher levels of poverty and
o Declining terms of trade hypothesis
Often linked to the dependency school of thought
Refers to the way in which global trade markets
affect relative prices.
A problem for countries that specialize in
exporting raw materials, but don‟t do
Selling something to someone, and the money
that they make is based on how much they later
have to buy these materials back from other
o Volatility of global commodity markets Characterized sometimes by booms (oil) but more
often by busts.
Steady declines in global commodity prices since
Makes it hard for countries to budget and have
o Natural resource sectors are often “enclave sectors”
with poor linkages to the rest of the economy
Happens in Canada with the Oil Sands of Alberta
Makes it possible to have lots of resources and
The money made from resources is spent outside
of the country, so the wealth doesn‟t really
benefit the country.
o Dutch Disease hypothesis
Resource booms “crowd out” investment flows
into more productive sectors of the economy
Example: All foreign investment money being
directed at ONLY the Oil Sands, so then the rest
of the economy is ignored.
Resource Curse and Political Development
Resources are often associated with the reinforcement of
authoritarian regimes and states.
o One scholar calculated that a 1% increase in a state‟s
dependence on natural resource resulted in an 8%
increase in the probability of authoritarian rule
Showing a general trend.
Might not be correct
Resources are also associated with the weak performance of
new democracies – countries with abundant natural resources
often having weak transitions to democracy if not democratic
o Induces laziness
Easier to establish an authoritarian rule than to
include citizens in democratic processes.
o If natural resources are controlled by private economic
elites, their abundance can promote “rent-seeking”
o Abundant natural resource endowments can lead to the
emergence of “rentier states”
What is “rent-seeking behaviour”?
Rent: o Collier – “rent” is the excess of revenues over all costs
including normal profits.
Profits WAY in excess
Monopoly profits from extractive industries
connected with natural resources
Strategic aid payments
Cold War, War on Terror, etc.
Money from Western countries
Sending money back to one‟s family “back
Money not generated within the borders.
How is “rent” used?
Distributed as a mechanism for maintaining influence and
o Can be distributed by political elites, or even business
Can include a wide array of things from the:
o politically-motivated subsidies and transfers often linked
to networks of political patronage and patron-
o Bureaucratic corruption (the allocation of public money
for private gain)
Deciding that he wants to make some extra
o Other illegal transfers
In essence, „rent-seeking‟ behavior represents the salience of
informal political processes that can serve to undermine the
formal and institutionalized rules of the game
Example: IN DRC, one scholar often argued that “the process
of informalization and de-institutionalization…has now become
Rent-seeking as a partial explanation for why Latin America
stuck with import-substitution industrialization (ISI) while
East Asia adopted export-oriented industrialization (EOI)
o ISI: promote self-reliance.
o Rent seeking behavior can complicate policy making
process and make it more difficult for countries to
What is the “rentier state” ?
Large amounts of revenue accrue directly to the state o Disproportionately large amount of money going to the
Mitigates need to raise large amounts of money through
Absence of significant taxation weakens rights of citizens to
demand accountability from rulers – “no representation
o The more viable the system of taxation, the more viable
is the relationship between the state and it‟s society.
o Many countries in the developing world have this
o They avoid the citizen‟s hate for taxes, and try to
generate money elsewhere.
o Example: American Revolution. The Americans didn‟t
want the British to tax them unless they let them
represent their own interests, and actually give them
space to grow in ways that they see fit.
o No representation without taxation: a recipe for
o Gets citizens to comply because they get money instead
of an opinion. Strengthens the ability for the state to
say “shut up” to the citizens.
Further financially empowers „rentier states‟ to coopt
populations through the distribution of rents
In turn, encourages „rent-seeking‟ dependency-creating
behavior on the part of socio-economic and political elites…
The Resource Curse, State-Breakdown, and the Emergence of Civil
There is a strong statistical correlation between dependence
on natural resource exports and civil war
Particularly strong with respect to secessionist civil war
o Secession: when a group wants to separate from the
Example: Quebec and Canada
Some evidence suggests that there is a strong correlation
between natural resource endowments and the length and
intensity and territorial spread of civil wars
o Similar to war economies
o Might not cause the problem, but they can help
Natural resource endowments also seem to correlate
negatively with successful peace-building initiatives
Why? o Natural resource endowments can exacerbate
grievances associated with the outbreak of civil wars
Uneven ethnic/regional distribution of
This in turn can provide motivation for emerging
rebel groups to capture them
o Natural resource endowments can also give rise to
explanations about the causes of civil wars associated
Providing incentives for fighting
For prolonging civil wars
For NOT pursuing peace
Moving from “Correlations” to “Causes” – Why is This so Difficult?
How to measure resource abundance…?
o Ration of revenue from natural resource endowments to
o Ratio of natural resource endowments to overall
o Revenue from natural resource endowments as a
percentage of government revenue?
o What data sets does one use? How does one know
Is the problem natural resource endowment in general, or is it
with particular types of natural resources?
o Some commodities have a positive trend with respect to
the terms of trade
Sometimes the prices of commodity get better.
o What difference does it make if resources are extracted
in one place versus resources whose extraction
processes are diffused throughout the country (oil
o In the context of civil wars, some scholars argue that
the real problem is the existence of „lootable‟ resources
Resources that are easy to extract, vs. resources
that require complex and complicate practices.
o In other words, the answers to these questions remain
unresolved…. It is also self-evident that natural resource endowments do
not always have negative outcomes….
o Not incompatible with improved outcomes with respect
to human development
o Example: recent UNDP Human Development Report
findings with respect to Oman and Saudi Arabia. They
are resource-rich AND have a high per-capita income.
o Larger literature on „rent-seeking‟ behavior reveals that
it is not necessarily associated with underdevelopment
and slow growth. Rent-seeking behavior can have
different effects in different political contexts.