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natural resources

Economic development in resource-rich, labor-abundant economies

Justin Yifu Lin's picture

Tackling poverty and inequality through appropriate growth strategies is at the core of the World Bank’s mission. In my view, achieving sustainable and inclusive growth depends on a well-functioning market and to a significant extent also the degree to which government policies facilitate private firms’ upgrading and diversification into industries that are aligned with an economy’s comparative advantages.

To smooth the way and allow this dynamic process to function optimally, we need to answer many questions that are unique to different types of economies. For example, how is it possible to successfully tap a developing country’s comparative advantage when it is rich in resources and has an abundant labor supply?

Of Dark Matter and Domesday

Kirk Hamilton's picture

As surprising as it may seem, there is a deep dark secret at the core of the System of National Accounts (SNA) – the accounts used by Finance ministries worldwide to measure economic performance. The numbers don’t add up. We can see this in the table below, showing the net worth of Brazil and its composition in 2005. The final two lines in the table report a measure of Brazil’s net national income and the implicit rate of return on wealth (the ratio of income to net worth). The return to Brazil’s produced and natural capital is over 18%! As good economists, we should all be investing our pension funds in Brazil. Why? Because financial market data tell us that the long run real rate of return across the broad range of assets averages only about 5% a year.
 

Table – Net worth and net national
Income (NNI) in Brazil, 2005, $million
Produced capital  1,909,259
Natural capital 1,713,939
Net financial assets -117,221
   
Net worth 3,505,978
   
Adjusted NNI 636,356
Implicit rate of return 18.2%
Source: The Changing Wealth of Nations
World Bank (2011)

 

Natural Resources and the Washington Consensus

Shanta Devarajan's picture

In a recent interview on the Canadian Broadcasting Corporation, I reacted to statements by Patrick Bond on Africa’s export of raw materials and on structural adjustment policies. I said that the problem with natural resources was not that Africa exports them, but that many African governments have not used the revenues from these resources productively. On structural adjustment, I said that policies followed by the better-performing African countries over the last 15 years were quite similar to

Resource Wealth Need No Longer Be a Curse

James Bond's picture

Recently, my colleague Cara Santos Pianesi flagged an op-ed she thought might interest me. The aptly-titled op-ed, Resource wealth need no longer be a curse was written by Mats Berdal and Nader Mousavizadeh and published in the FT on March 25th.

What Can Sri Lanka and Africa Learn from Each Other?

Shanta Devarajan's picture

The title of this post may seem a bit odd. What can an island of 20 million people and a diverse continent of 47 countries have in common? The answer: Both were thought to have initial advantages that would generate rapid economic growth; instead, they have fallen painfully short of expectations. 

In the African case, the advantage was its rich natural resources such as oil and minerals. But instead of exploiting this potential ticket to poverty reduction, Africa’s natural resource producers have seen their per capita income grow more slowly than that of non-mineral countries. Nigeria is a case in point. Its per capita income in 1970 (before the oil boom) was $913; today it is $454.

Sri Lanka’s asset is its human resources—reflected in the high levels of literacy and low levels of child and maternal mortality that have stood out since the 1960s. Like Africa, Sri Lanka has been an exercise in disappointment. In fact, there is no other country with a lower infant mortality rate and a lower per capita income than Sri Lanka.

The question for Africa and Sri Lanka is therefore how to manage the enormous assets they posses in a way that translates into sustainable wellbeing for their populations?

The Nobel Prize Committee pays attention to governance of the commons

Marianne Fay's picture


The Nobel Prize in Economic Sciences is being shared this year by Elinor Ostrom, a political economist at Indiana University, and Oliver Williamson, an economist at UC Berkeley. The award could not be more appropriate in these times of rethinking what markets can and cannot do. 

The award to Ostrom, who has spent her professional life studying how societies manage common resources is particularly relevant as we draw closer to the Copenhagen summit and countries are busy defining what they are willing to do to protect the global atmospheric commons. 

In fact, Ostrom wrote a background paper for us earlier this year for the World Development Report 2010: Development and Climate Change.  In it, she took exception to the notion that a solution to global change must be global. Such a solution would take too long, she argued. She also reminded us that a solution negotiated at the global level, if not backed up by a variety of efforts at the national, regional, and local levels, was not guaranteed to work well. This is because climate change is the result of many individual and local decisions.   

Natural resources: Africa VP calls for ‘creative dissatisfaction’ campaign

Derek Warren's picture

Mauritania mining corridor. Photo credit: World Bank Policy Note on Utility Service Reform in Mauritania's Mining Corridor. This was a lunchtime debate designed to induce a degree of indigestion!

Participants at an annual meetings session hosted by Africa Region VP Oby Ezekwisili faced the uncomfortable assertion that the majority of citizens in resource-rich African countries have seen little if any improvement as a result of decades of natural resource exploitation.

For some, oil or mineral wealth has proven a curse rather than a blessing, exposing them to economic instability, social conflict and lasting environmental damage.

To an audience including government ministers from DRC and Cameroon, Oby followed that up with a call for a campaign to generate a sense of ‘creative dissatisfaction’ – to provoke a demand for change in the way natural resources are exploited and the resultant benefits distributed.

Centre-piece of the debate was a new Natural Resource Charter, circulated in draft for consultation. Its intention is to aid governments and their citizens in resource-rich countries to use them to generate economic growth and promote the welfare of their population, without destroying their environment. It’s a blueprint for implementing the objectives of the Extractive Industries Transparency Initiative (EITI).

Mismanagement of natural resources gives us no margin of error to handle an increasingly unpredictable climate

Johannes Zutt's picture
 Tree planting: Professor Wangari Maathai with Johannes Zutt
   Photo © World Bank/
   Tree planting: Professor Wangari
   Maathai with Johannes Zutt

I spent yesterday in rural Kenya with the World Development Report (WDR) team and the inspirational activist Professor Wangari Maathai, the 2004 Nobel Peace Prize laureate. Professor Maathai graphically showed us the problems across multiple areas of the economy when the climate does not behave as predicted. The visit powerfully demonstrated how much worse the effects are when the changing climate combines with a poorly managed environment. Only 1.7 percent of Kenya's territory has forest cover, compared to about 10 percent a century ago. And the forests are increasingly fragmented. Yet these fragments protect water towers that are the source of the country’s rivers. The diverse natural forests regulate rainfall, provide homes for Kenya's stunningly diverse flora and fauna, and of course they also help our planet to store carbon. But human activity in and around the forests continues to threaten their survival. Over recent decades, plantation forests have replaced much of the natural forests that once covered Kenya, but they are much less effective at regulating rain, preventing soil erosion and protecting diversity. As I said on our visit to the Aberdare Forest yesterday, in many places I did not see forests; what I saw instead were tree farms.


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