Dutch Disease
When we think of countries with large reserves of natural resources that are also very valuable, we assume that it makes the country rich. We feel envious: they don’t have to work hard to get rich, they just happened to own the right patch of land. Or is it? And no, I am not talking of the case where a handful of people own, say, the oil field, and mint money while the rest of the population stays poor. Turns out the situation is more complicated. First, if the country doesn’t have the expertise to extract or process that resource, they inevitably rely on foreigners to do the same. Which means a good chunk of the money goes out of the country. Second, extracting resources from oil fields or mines is hardly a well paying job, so most of the jobs created are hardly making people rich. Third, if the resource was found in a poor country, they often strike poor deals with foreigners because they’re looking at prices from their current (poverty-striken) levels. Fourth,...