Definition
The natural resource curse, also called the paradox of plenty, is the observation that countries with abundant oil, minerals, or other natural resources frequently experience weaker long-run growth, more unstable economies, and poorer governance than countries with fewer resources.
It is a curse only in a relative sense. Resource wealth should be an advantage, yet the evidence shows that, on average, heavy dependence on resource exports correlates with worse development outcomes rather than better ones.
Why it matters
How it works
Several mechanisms drive the curse. A resource boom can raise the exchange rate and wages, making other export industries uncompetitive, a pattern known as Dutch disease. Volatile resource prices make government revenue swing wildly. Concentrated resource rents invite corruption and rent-seeking, weakening institutions.
The curse is not inevitable. Countries with strong institutions, diversified investment, and disciplined saving of resource revenue have used natural wealth successfully. The outcome depends less on the resources than on how the windfall is governed.