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NATURAL CAPITAL

from storms while additional scientific work is undertaken on assessing technical strategies for using oceans as potential carbon sinks (UNEP and others 2009).

Nonrenewable resources: Promoting rent recovery and reinvestment Economic growth in countries with nonrenewable resources is a process of extracting resources efficiently and investing revenues from these resources in other forms of productive capital that can continue to produce income after the nonrenewable resources are depleted. Only in this way can these resources be used to promote sustainable development. Some nonrenewable resources are essential for green growth. The generation of solar power uses silicon; devices that control vehicle exhaust and refining processes for cleaning fuels require precious metals to act as catalysts; wind turbines, semiconductors used in smart grids and other computer applications, and batteries for hybrid vehicles require rare earths; and almost all processes require steel, which is made from iron, carbon, and alloying elements. Natural gas is a relatively clean fuel; because it can readily generate power on demand, it complements solar and wind power well.

Avoiding the natural resource curse One major problem for countries with abundant natural resources is what is known as the natural resource curse. This phenomenon refers to the economic observation that countries rich in natural assets— particularly oil, gas, and minerals—often fail to use these resources as a platform for sustainable growth and actually grow less rapidly than similar countries without such assets. These countries—such as the Democratic Republic of Congo, Guinea, Nigeria, and República Bolivariana de Venezuela— fail to transform natural capital into other types of capital, such as human capital and infrastructure.

Early explanations of the resource curse focused on economic factors, such as the difficulty of managing revenue volatility or the negative impact of exchange rate appreciation on the more technologically sophisticated manufacturing sector (Dutch disease). Such analysis left open the question of why some countries were able to overcome these economic hurdles. The current consensus is that the resource curse is the result of weak governance (institutional capital) and human capital (Gelb and Grasmann 2010). Concentrated resources, coupled with very large investments, are easily subject to capture. Instead of directing their energies toward productive activities and the development of the institutions needed in a market-oriented economy, political and economic elites engage in “rent seeking,” using their proceeds to reward their supporters and stifle dissent by potential reformers. During downturns, the government fi nds it difficult to adjust to lower levels of spending, because the survival of the regime may depend on rent allocation. In short, resource rents are used not to develop other forms of productive capital but to perpetuate the political regime and its inefficient economic policies. Once trapped in the resource curse, it is difficult to escape, because the elite have little incentive to do so. In the extreme case, the resource curse can lead to armed conflicts as a way to determine access to the rents. Not all resource-rich countries get trapped by the resource curse. Some (like Australia, Botswana, Canada, Chile, and Kazakhstan) have managed to avoid it altogether. Others (like Ghana, Peru, and Zambia) suffered the resource curse earlier in their development but went on to enjoy steady growth in the past 10 –15 years. Moreover, many of the fastest-growing countries in the world in the past decade have been mineral-rich countries, some of which were once victims of resource curse, although the sustainability of such growth has not been tested by a significant drop in resource prices or production. Given that most of the fastest-growing countries in Africa since 2000 have large

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Inclusive Green Growth  
Inclusive Green Growth  

As the global population heads toward 9 billion by 2050, decisions made today will lock countries into growth patterns that may or may not b...