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Just a reminder – I am no longer posting to this blog.  The new home for the journal – Develop Economies – is located here:  http://developeconomies.com/

Thanks for the support.

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I recently hit 10,000 views and, in celebration, I have bought a domain name and am moving to a real website.  The Journal of Josh Weinstein is now Develop Economies, a journal of everything having to do with serving the base-of-the-pyramid, poverty alleviation, and aid and development in the third world.  This will be my last post from this URL.  Thanks for the support.

www.developeconomies.com

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In my last post, I discussed why access to abundant natural resources is actually counterproductive to the development of poor countries.  The idea comes from Paul Collier, a development economist who penned the book The Bottom Billion, a summary of his findings from thirty years in the industry.  While much of the world lives below the poverty line, there are only a handful of countries that have made no progress in terms of economic development over the last few decades.  In fact, most of these “bottom billion” countries have actually regressed, posting negative GDP growth.  According to these countries, each of these countries has fallen into one or more “traps,” which produce a self-perpetuating cycle of stagnancy, at best, or decline.   Access to natural resources is one of these traps.  Here is an overview of why this is so:

Natural resource wealth, in addition to increasing a country’s propensity for civil war, also creates its own trap. In Collier’s view, natural resources can be a curse, because of “Dutch Disease”, which makes a country’s other export activities uncompetitive, and causes commodity price volatility. Countries of the bottom billion are often too poor to harness the wealth they gain from natural resources, such that other sectors of the economy remain stagnant, prohibiting future economic development.

So the money gained from natural resources is not properly invested in improving other industries, such as manufacturing and agriculture, causing them to atrophy.   Once the natural resources dry up, these industries – the real economy – are unable to sustain the false productivity levels during the natural resource boom, to the detriment of the economy as a whole.  (more…)

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