The Myth of the Resource Curse
“Rise early, work hard, and strike oil” was Rockefeller’s advice to young people looking to become successful. Today, the formula for success is quite different: academia advises to avoid striking oil, for it will doom a country’s economy to lower growth, and its society to bad governance. This advice results from studies in economics and political science purporting to show that countries that rely on extractive industries like oil tend not to develop as robustly and be as well-governed as those without the benefit of natural resources. This is called the “resource curse.”
The subject is of more than academic interest. As the United States becomes a major energy producer, will it become subject to the resource curse? Probably not. If the phenomenon really does exist, it flourishes in countries that lack strong institutions, governmental accountability, and already diverse economies. There is no reason to believe the political cultures of established democracies like the United States would be subject to the curse.
Illustration by Barbara Kelley
Discoveries of new gas fields along with innovations in recovery of shale, coal seam, and tight gas will turn the United States, Israel, Canada, Australia, and potentially other nations into major energy-producing countries. Production and estimates of reserves have grown steadily as technological innovations expand drilling and generation of power from gas.
These developments will have far-reaching effects, both economically and politically. Trade balances will be significantly altered as oil imports are reduced and gas becomes a major export. The United States is the world’s largest petroleum consumer, importing 45 percent of our needs; eliminating that will dramatically change our balance of trade. Gas will probably still trail oil and coal as an energy source for decades (the International Energy Agency predicts oil’s dominance until at least 2035, and coal only provisionally overtaken then). But our reduced dependence will have beneficial consequences even in the near term.