Handbook of Sustainable Development
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Handbook of Sustainable Development

Second Edition

Edited by Giles Atkinson, Simon Dietz, Eric Neumayer and Matthew Agarwala

This timely and important Handbook takes stock of progress made in our understanding of what sustainable development actually is and how it can be measured and achieved.
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Chapter 17: The resource curse and sustainable development

Richard M. Auty


Economists recognize that resource abundance can accelerate economic development by increasing the rate of investment in resource-rich economies relative to the rate in resource-poor economies and also by expanding the capacity of the economy to import the capital goods needed to build the infrastructure of a high-income country. Provided policies are adopted to curb potential environmental damage by correcting market failure then natural resource abundance can advance sustainable development (Auty and Mikesell, 1998). Renewable natural resources can yield a stream of rent indefinitely with which to accelerate sustainable development, but the depletion of finite resources such as minerals is also compatible with sustainable development. Environmental accounting explains that this can be achieved by investing annually during the life of the finite natural resource a sufficient fraction of the rent in order to maintain or enhance the total capital stock (World Bank, 2011a). The environmental accounting perspective assumes that there are either natural substitutes for the depleted finite resource or that technological substitutes will be found. It also recognizes that new technology could render the natural resource obsolete so the strict conservation of the finite resource may not be desirable. Nevertheless, the notion that natural resource abundance can be a curse emerged strongly in the 1980s (Gelb et al., 1988). It is not a new idea, however. Sixteenth-century Spain provides an example of a country that failed to prosper from the gold and silver shipped from its New World colonies.

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