These are the best of times for Alberta: a 2006 economy sprinting at a breakneck pace of almost seven per cent, historically low unemployment, and surging salaries attracting people from around the world.

The times are brimming with optimism and opportunity – but could it be that all this good fortune is creating a collective over-confidence? After all, the seeds of calamity sprout in times of bounty, and pride often comes before the fall.

Until the mid-1980s, conventional wisdom held that exploitation of natural resources represented an important – if not the best – means for poor countries to raise their standards of living. But statistics refute this perspective and show that poor countries generally outperform resource-rich ones.

Consider the case of Nigeria. Between 1970 and 1999, the country earned well over US$300 billion in crude oil exports, but the World Bank estimates that 80 per cent of that revenue accrues to only one per cent of the population. More than 70 per cent of Nigerians live in extreme poverty on less than $1 a day, making it one of the poorest countries in the world.

Equally illustrative is a comparison of petrolist states (Saudi Arabia, Iran, Nigeria, Venezuela) with the Asian tigers (Korea, Taiwan, Hong Kong, Singapore). The former have stagnant growth rates despite their huge oil and gas endowments whereas the latter have already catapulted themselves into the league of developed nations owing to their investment in human resources.

“Casual observation suggests that there is virtually no overlap in the set of countries that have large material resource endowments and the set of countries that have high levels of GDP,” writes Harvard economist Jeffrey Sachs, the celebrity-author whose work on the ‘resource curse thesis’ seeks to explain the counter-intuitive inverse relationship between resource abundance and economic growth.

Unraveling curse logic

By convention, a “cursed” activity is one that will fail regardless of how well it is performed. In the case of natural resource development, the curse would have it that no matter how expertly a country develops its resources, the economic benefits of that development will be disappointing. The rational person immediately spots the absurdity: if there really were a resource curse, one would simply have to choose to leave the resources in the ground. Of course, that’s not what we do.

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