The Natural Resource Trap - Essay Example

The Natural Resource Trap According to Hogan William and Sturzenegger Federico, of the research “The Natural Resources Trap,” the diminishing levels of natural and the increasing demand for the products is a threat to the private and public businesses due to the subsequent conflicts occurring therein. For example, the research articulates that the demand for energy products has propelled the private sector to embrace oil and natural gas exploration and drilling projects in different economies. However, challenges are emanating from the constituent governments’ needs to implement a framework that seeks to guarantee increased revenues whenever the firms’ profit margins are overwhelming. The study develops the understanding that economies with abundant natural resources often use nationalisation and expropriation tactics in order to influence the GDP and GNP ratio (Davis, Graham, and John 1). The use of the biased trade policy in protection of the skilled workers will deliver an understanding of the perceived growth in commerce and alleviation of the resource curse. Discussion of the Barros’ growth regressions in relation to the resource curse phenomenon The researcher evaluated a list of 98 countries in the mid-20th century, and established that the nations whose resources were abundant showed a positive growth in the GDP ratio compared to those that had reduced amount of resources during the study (Humphreys 91). According to his statistical approaches, the different nations among the ones chosen for the study were capable of alleviating the problems of unemployment through the maximum exploitation of the resources. The alternative remedy of production fuelled the prevalence of increased per capita income and reduced poverty rates amidst the reduction population growth. Hence, the researcher established that nations that have increased levels of natural resource exploitation often influence the subject society to increase their physical investments at the expensive of population growth (Davis, Graham, and John 2). The regression model asserts that the results of increased GDP and reduced fertility ratio emanate from the availability of capital and sufficient investment opportunities in such economies. The argument is that the paradox of plenty or else the resource curse serves in forecasting the processes that might emanate from the maximum exploitation of the non-renewable resources. For instance, it is realistic that the economies with abundant resources establish capitalistic and neoliberal practices that coerce individuals to engage in physical innovative practices for them to live in the elevated social classes with profound living conditions (Robinson 450). The advent of Barro’s growth regression approaches in evaluating trade growth amidst the resource curse present facts that a nation that perceives an increased GDP and reduced fertility with the exploitation of non-renewable resources might eventually be subjected to absurd and increased poverty rates if appropriate remedies are not established. In order to ensure a positive influence in protecting the skilled workers and also in restructuring the country’s economy from the dependence on non-renewable resource exploitation, economists perceive that the affected nations should incorporate new economic remedies such as eco-friendly ventures in order to ascertain future trade growth and economic stability. Barro perceives political instability is a major aspect that challenges the maintenance of economic stability in the countries whereby the governing institutions face reactions from the subject population of citizens (Davis, Graham, and John 4). Therefore, the growth regressions emphasize on the use of unity in ensuring profound growth in the country’s GDP and per capita income among the individual population. In order to achieve the outcomes, the administrations should embark on empowerments to ensure that the revenues created by the natural resource projects benefit the constituent population. The omitted bias variable in the relation to the curse of natural resources The OVB approach analyses different economic situation; however, the implementation of the bias enables it to omit an important variable either related to the independent or the available dependent variables of the study. Under such situations, the authors establish the prevalence of inconveniences as an evident course of establishing the results of the causal factors during the research project. Countries that seek to implement appropriate remedies towards the growth of the GDP and per capita income among the citizens should establish economic regression approaches that concur with the elevation of beneficial and non-biased resource exploitation methods (Robinson et al. 453). According to the Nunn and Trefler’s study outcomes, the OVB did not influence any changes in the results; hence, governments should perceive the policy as an appropriate factor in evaluating the factors that can trigger growth in the foreign and domestic trade. Arguably, the OVB approach is an important bias system that could enable nations to protect their population of skilled workers as they will not be affected by any evaluation studies whose results might lead to the implementation of economically challenging issues. Krugman’s Geography Theory and its relation to growth in trade policy under the influence of the resource curse The researcher to the theory deviates from the critique that perceive the theory as meant to control the 19th and 20th centuries’ economies and inconsistent to the 21st century’s economies. In his course, he recognizes that the New Economic geography is a positive study of elevating developed and developing economies towards the establishment of sustainable economic measures to ensure growth and reduce the risks of retrogress upon the exploitation of the natural resources. The Krugman approach is a possible remedy to ensure that the citizen population of skilled workers in every economy will benefit from the revenues accrued from the non-renewable resources. The study’s incorporation of the G8 economies that include China and America among others is acquits it from the claims that it is an inconsistent approach towards the restructuring of economic growth (Humphreys 94). Since the natural resource curse has posed challenges in the economic, social, political, and technological structures of developing and bottom billion economies as well as the developed economies, it is of critical importance to engage in the use of the New Economic Theory in evaluating the areas that need to be addressed and the outcomes will enhance growth of the trade policies for the benefit of the nations’ skilled workers. It is evident that the identified structures of a country affect the growth of trade from distinct dimensions; hence, the theoretical study implemented by Krugman might serve to the advantage of enhancing a country’s economy through the GDP and GNP factors effective outcomes (Robinson et al. 457). After analysing the Chinese economy under the New Economic Geography approach, it is evident that the country’s economic growth emanates from the exclusive use of importation tactics that enable the nation to acquire raw materials at a rate above 90% compared to the finished products’ importations. The practice was used in the United Kingdom and United States in the 19th and 20th century during the industrialization period. Since the outcomes propelled the economies to grow profoundly and the same case has influenced the Chinese economy, it is critical to re-evaluate its ability in propelling economic growth through the implementation of the adequate trade policies related to the phenomenon. The perception is that the newly implemented trade policies will serve towards the creation of domestic industries that will enquire for labour from a country’s population of skilled workers (Langton 72). The advanced remedies would serve towards the creation of an economy that is resistant to the threat of the resource curse since the majority citizens would be benefiting from the positive economic measures. On the other hand, the nation that will adapt the New Economy Geography as a remedy towards growth in the trade policy will accrue beneficial returns on the domestic investments since the increased exports and reduced imports will subsequently contribute to the acquisition of a positive difference in foreign exchange. Therefore, the use of the Krugman Geography Theory would be a resuscitation project to empower the economic growth strategies, social stability, and environmental sustainability through the positive adjustments in the fields (Robinson et al. 458). The policy would be a sustainable measure to reduce the negative effects that emanate from the resource curse in those economies whose geographic coverage embraces vast non-renewable resources. The application of the Gallup Sachs regressions in defining the growth in trade amidst the existence of resource curse challenges It is evident that economies with abundant natural resources often suffer the threat of the resource curse. According to Gallup Sachs regressions, it is critical to analyse the extent at which governments and citizens perceive to benefit from the available natural resources as the approach leads to the establishment of a framework that is competent in reduction of the conflicts that might emanate from the unprecedented conflicts (Langton 73). The advent of globalisation served to influence the global economies to restructure their trade policies in order to remain competent in the world’s import and export markets. However, the prevalence of the resource curse in different economies with the majority being African nations influences an adverse perspective towards growth in the established trade policies. The research evaluates that government structures determine the extent at which the economy might perceive abundant growth. Studies assert that the threat of the resource curse leads to internal conflicts within economies, and the characteristic is evident in many of the African, Middle East and East Asian economies (Humphreys 96). The authors indicate that the economies with abundant natural resources often lack the ability to exploit the underlying opportunities because of the challenges that they meet from the required capital since the projects of exploration and mining are capital intensive. Further, the authors realized that such economies facing the challenge of exploiting the natural resources endure the challenges of increased poverty, reduced literacy levels, and increased population among other social changes whose influence in the economic structures are often negative. It is critical to establish a framework that will incline economies towards the achievement of growth in trade through legal and political changes that will ensure that the constituent population in the affected nations perceive a positive change (Langton 75). Eventually, the empowerment of the citizens through monetary policies will lead to the growth of the GDP and per capita income, and it is at such a point that the practicing nations should adopt the privatisation policies of resources. The resolution will attract domestic investors into the natural resource mining projects. Conclusion Eventually, the resource curse that might have led to the existence of corruption, high taxation, revenue volatility, excessive borrowing, and internal conflicts will cease to exist following the introduction of equated trade policies (Humphreys 98). Confidently, the tactics used in rekindling economic growth and alleviating resource curse will be embraced by the citizens and the governments; hence, the incorporation of strict, ethical, and equality-oriented legal measures to the newly-founded economic measures will lead to the complete end of the resource curse. In conclusion, the evaluated regressions from the various researchers enable the economies to create stable trade policies that incline nations to alleviate the uncontainable threats of the resource curse while still protecting the skilled workers from suffering financial retrogression. Works cited Davis, Graham A., and John E. Tilton. "The resource curse." Natural Resources Forum. Vol. 29. No. 3. Blackwell Publishing, Ltd., 2005. Humphreys, Macartan, Jeffrey Sachs, and Joseph E. Stiglitz, eds. Escaping the resource curse. New York: Columbia University Press, 2007. Langton, Marcia. "The resource curse." Griffith Review 28 (2010): 72. Robinson, James A., Ragnar Torvik, and Thierry Verdier. "Political foundations of the resource curse." Journal of development Economics 79.2 (2006): 447-468. Read More