Wednesday, February 21, 2007
Resource curse - comparing India and Russia
The development literature has long been aware of the `resource curse' where countries with weak institutions are actually hurt, and not helped, by lucrative natural resources. One can't help wonder how the post-1945 history of the Middle East would have shaped up differently if there had been no oil there. On Bloomberg today, there's a nice article by Amity Shlaes comparing the evolution of India as opposed to Russia in the light of the lack of natural resources in India.
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India is blessed in many ways. It is a minor oil producer and has to import most of its oil and gas. It has bad quality coal and not enough deposits of other valuable minerals that could allow it to become a major exporter. As a result, most Indians know that they have to work for a living and their political leaders know that they have to work with the private sector and the middle class. Had it been different, the extraordinary revenues from natural resources would have all gone to the government and spent on patronage to control vote banks.
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