The Political Economy of Natural Resources

The political economy of Natural resources social research Vol 77 : No 4 : Winter 2010 1105 the rise in world prices of natural resources, coupled with the resource discoveries induced by high prices, is transforming Africa's opportunities.The economic future of Africa will be determined by whether this opportunity is seized or missed.The history of resource extraction in Africa is not encouraging.This article reviews and develops the political economy of natural resources as a guide to how Africa might avoid a repetition of that history.The resource curse has been analyzed over several decades.Although it was initially controversial, the evidence is accumulating that it is both a reality and severe.For example, Collier and Goderis (2007) use co-integration techniques to study the time profile of the effects of resource revenues.An advantage of this approach is that whereas cross-section results, on which previous literature has largely been based, encounter familiar problems of interpretation, these results come from changes in global prices, which can reasonably be taken to be exogenous.They find that although in the short run an increase in export prices of commodities raises growth, in the long run growth is substantially reduced.Simulating the recent commodity boom for the typical African commodity exporter, they find that if global history repeats itself, after two decades output will be around 25 percent lower than it would have been without the booms.Although the initial explanation for the resource curse, Dutch disease, was purely economic, it has gradually become evident that the key issues are political.The political economy of natural resources is about the interplay between politics and valuable natu-