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Domains of Culture NCOA Data Redundancy
Available literature on economic development has widely adhered to the assumption that specializing in economic policies such as reliance on the extraction of natural resources and cash crop farming leads to economic marginalization and poor development of the global economy. Among some pundits, such economic situations result from a resource curse (Bonini, 2012). This is a premise that suggests that low and income generating nations will in most cases fail to utilize the available wealth of natural resource to spur and sustain economic development. Some scholars consider the resource curse with relative to the global division of labor and biased exchange. Poor nations continue to offer wealthy and industrialized nations with inexpensive natural resources thus propagating a global hierarchy of accumulated wealth with the raw material producing countries stagnating at the bottom. This paper seeks to briefly reassess the assumption that raw material extraction and cash crop farming results in economic underdevelopment in nations that produce these goods.
Raw materials and economic development
Broad bodies of economic literature assess the symbiosis between wealth of natural resources and economic prosperity (Bonini, 2012). This literature provides for two distinct perspectives expressing reasons as to why raw material producing nations tend to be economically disadvantaged. As much as these two perspectives are in constant opposition as to the reasons why this is the case, both seem to be in agreement that raw material producing nations tend to be economically marginalized.
One body of literature underscores the perspective that institutional challenges result in the resource curse. The argument behind this school of thought is that poor national policies, corruption, ineffective governance and the prevalence of rent seeking behaviors have led to the poor economic development in resource extracting nations (Bonini, 2012). The second school of thought attributes low economic development to structural challenges which present such countries with dismal terms of trade during the exchange of finished products and raw materials resulting to biased exchange transactions in the international markets.
The first school of thought takes upon a traditional perspective with the shortcomings of poor natural resource producing nations being attributed to policy failures at the national level. The inability of natural resource extracting nations to convert incomes realized from the exchange of these resources into economic development results from poor policy formulation and implementation (Bonini, 2012). Indeed, there have been known cases where national policies failed to take advantage of appreciations in exchange rate at times when resource booms are realized. Successful policies should seek to lower inflation rates in non tradable national sectors and robustly focus revenue accumulated from the trade of natural resources in enhancing economic development. However, those opposed to this view suggest that corrections to such errors in policy formulation still fail to ensure that poor countries realize economic development.
Structural inefficiencies in poor resource extracting countries also similarly lead to further propagation of the resource curse. Nations which implement policies calling for the economic dependency on resource extraction and cash crop farming is bound to result in underdevelopment and global economic marginalization (Bonini, 2012). This is mainly due to the fact that the global economy is dependent of the division of labor pitting natural resource extracting nations at poor negotiating positions in contrast to the negotiating positions held by the developed nations.
The above outcomes have been true for countries such as Britain which colonized much of the world in centuries past. As such, the country successively instituted accumulation oriented policies allowing for it to take advantage of global economic restructuring and periods of economic crisis to better place itself at the pinnacle of global economic hierarchy at the expense of underdeveloped resource rich countries.
Bonini, A. (2012). Complementary and competitive regimes of accumulation: Natural resources and development in the world-system. American Sociological Association, Volume XVIII, Number 1, Pages 50-68 ISSN 1076-156X.