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The Resource Curse Hypothesis Essay Example

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The Resource Curse Hypothesis

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The Resource Curse Hypothesis. In the event of price fall for the natural resources, their ability to meet liability repayments will be condensed, and as a likely extra effect is a drop in the exchange rate. The incident has seen countries like Venezuela and Nigeria suffer a rapid increase of their debt burdens in the year 1980. During the period, many bankers refused to lend them and hence they fell into arrears. As a result, the two nations attracted huge penalties and sky-rocketing interest rates making their loan to grow more and more. In this case, economists agree that such countries will experience minimum growth in spite of their resource wealth.International analysts on political and economic issues observe the tendency of oil-rich nations to prompt international quarrel, or to be targeted thereof.

A good example of these nations is Saudi Arabia. When countries attract a bad label form the international community, they become a target of unfair foreign policies and economic sabotage. In the case of Saudi Arabia, its support for Iraq and Iran has been viewed with suspicion by the united state of America, Israel and other countries with military strength. Due to the suspicion, many countries have been influenced to give the country a hard economic time. Economic sanctions and export ban has been applied on Saudi Arabia. In this case, the country cannot fully utilize her natural resource endowment without friendly international policies. Therefore, Saudi Arabia will continue experiencing retarded economic growth despite owning huge oil deposits.Japan, though having little resources, has made tremendous steps in terms of development. One of the main reasons why Japan is outstanding in terms of economic growth is the fact that it has enjoyed peace and political stability for decades. In this case, it has established very close ties with economic powerhouses such as the USA and Israel. For this matter, Japan enjoys friendly foreign policies from these super economics. In the same way, South Korea and Indonesia have found favor in the eyes of the big economies. In this case, they experience high rate of economic growth despite fewer natural resources. The Resource Curse Hypothesis.

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Dowd, K., & Hutchinson, M. (2010). Alchemists of loss how modern finance and government intervention crashed the financial system. Chichester: Wiley.

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Dubofsky, M. (2013). The Oxford encyclopedia of American business, labor, and economic history. New York: Oxford University Press.

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Helmer, J. (2010). Moon handbooks. Berkeley, CA: Avalon Travel.

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Publishing, O., & Centre, O. (2011). Development in Eastern Europe and the South Caucasus. Paris: Organisation for Economic Co-operation and Development

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