Explain the effect of natural resources on growth and judge the claim that scarce resources hold growth back
The idea
Natural resources include renewable ones such as forests and fisheries and non-renewable ones such as oil and minerals. They can support growth, but economies with few resources have also grown fast through trade, capital and technology, so access matters more than ownership. Resource wealth can even hold growth back. Under Dutch disease, resource exports push up the real exchange rate, making manufacturing and other traded sectors uncompetitive, and those sectors often generate productivity gains; resource rents can also weaken institutions. The argument that finite resources cap growth overlooks prices: scarcity raises prices, driving conservation, substitution and new technology. The trap is equating abundance with strong growth, or scarcity with a fixed ceiling.
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