IL5011 - Resources & Development
Week 4 - (Neo)colonialism and Resource Exploitation
Why has the 'Third World' for the most part, been unable to reap the benefits of its human, natural and physical resources?
1 Statement of Question
- The third world is defined by inability to realise potential of its resources
- Inability to reap benefits is defined by western ideas
2 Defining Factors for Development
2.1 Climate
- No developed countries in the equatorial zone
2.2 History
- Colonisation
- Development Path
2.3 Politics
- Economic System
- Land ownership - foreign, domestic or individual
- Has strong influence on distribution of income
- Human Rights
- Stability
2.4 Physical Resources
- Can become highly developed with good stocks of physical resources (Switzerland, Japan)
- Mix can be important (eg iron ore but no coal)
- Plentiful energy supply
2.5 Natural Resources
- Plentiful and good land
- Well managed land
2.6 Human Resources
- Single most critical factor
- Number
- Skill Level
- Cultural outlook (Tradition & Religion)
- Cohesion/Fragmentation of a people - Tribalism
- Industrial organisation, productivity and managerial style
- General administrative climate and corruption
3 Interdependent system of resources
- The more factors that are present the greater the opportunity for development
- Schematic model of interaction
- Feedback loops
- Three subsystems of resources must work in harmony & develop at proportional rates
- Siphoning off at any level will cause major disruption
- Colonialism
- Bad government
- Excessive corporate profit taking
- Debt repayments
4 Example of Complex Interdependencies : Dutch Disease and Auty's Resource Curse Theory
4.1 Dutch Disease
The coexistence of booming and lagging sectors of economy due to a temporary or sustained increase in export earnings distorting value of domestic currency
Example - 1859 Australian gold rush or 1990's Celtic Tiger
4.2 Resource Curse Theory
Proposed by Auty in 1980's - similar theory put forward by Geld of World Bank
Six different mechanisms
Example 2 : Mineral Economies
- Exports of raw minerals provide for all foreign exchange requirements
- No pressure to develop other sectors of economy
- Very capital intensive without generating much employment
- Mineral deposits unequally distributed (eg ruling elites, foreign investors, geographically)
- Much profit can flow out of country to foreign investors
- If significant tax generated from exports may lead to Dutch disease
- Economy extremely vulnerable to mineral price fluctuations
5 Conclusion
Many interrelated factors influence how a society will use its resources. The presence or absence of certain resources is less important than how resources are managed by the people to develop their society.
Bibliography
Auty, Richard, Sustaining development in mineral economies: the resource curse, Routledge, 1993
Davies, Graham A., Learning to love Dutch disease: Evidence from the mineral economies, World Development Vol. 32 No. 10, 1995
Landes, David, The wealth and poverty of nations, 1998
Meeker, Joseph, Misused Resources, Resurgence Vol. 125, 1986?
Pagni, Lucien, Resources and the way they are used, The Courier Vol. 139, 1993
Sachs, Wolfgang (ed), The Development Dictionary, 1992
Todaro, Michael P., Economic Development in the Third World, 1977
© Eoghan Walsh, 14th October 2002
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