Natural resources: The curse of developing countries?

People are dying while sitting on the riches of their lands. This is the horrid reality in most developing countries, particularly in Indonesia.

Covering 1,904,570 square kilometers, Indonesia is extremely rich in natural resources. Active volcanic activities have made the land fertile, and resources are abundant. Salt, for instance, was believed for some time to have originated in Indonesia, and in fact is the etymological root of the word “salary” as it was used as a payment tool. In the old times, during a banquet, the person sitting closest to the salt in a table holds the highest rank or position.

For this reason, Indonesians are proud of their homeland. (Or at least this is true for every elementary school student who was taught to believe we are rich in natural resources.) This pride inclines us to say that we are important in global geopolitical relations, and that we can survive on our own, unlike for example Singapore, which basically lives on its neighbors’ resources.

The cruel irony is that these same children grow up witnessing or undergoing extreme poverty. This is even more painful in light of how they were taught to dream and aspire for great things in this rich land.

Scarce resources or unrestrained greed?

We were taught that resources are scarce. Economic principles were in fact borne of the concept of resource scarcity. This is why their core mantra advocates efficiency in modes of production.

But what if the world did indeed provide natural resources sufficient enough such that people could simply take their basic necessities – food, water, housing materials, clothes – from their immediate surroundings? In that scenario, economic principles may not even be needed.

There are several caveats to ponder.

First, is it true that our world, in reality, does not provide sufficient resources for all? Is it even the case that resources are scarce, or is it human activity – greed, pure and simple – that makes it so? Humans always want to have what others have, even if they have more.

There is no absolute or objective baseline for sufficiency. The problem with the notion of “sufficiency” is that the baseline keeps readjusting based on how much other people have. In layman’s terms, it’s called “jealousy”, which leads to self-entitlement: “I worked hard for this, I am therefore entitled to this benefit”. We measure our level of “sufficiency” based on our hard work-benefit ratio in comparison to others. In a recent behavioral study presented in a TED Talk, it is suggested that the richer you are the more likely you are to cheat the game, and the more you feel entitled to the wealth and status you earned from cheating. It presented a social experiment involving a rigged monopoly game, where one player was randomly given the upper hand with triple the amount of money and double dice turns. When the rich players talked about why they inevitably won the game, they cited their strategies and became less attuned to their “privileged” status.

Second, assuming natural resources are scarce by nature, not due to human greed, is it morally acceptable to suggest that those who are the most efficient at production get the biggest share of natural resources, while others who are less efficient should live at their mercy?

This is not to suggest that there is no place for economic principles, but they are not without flaws and not without vested interests. I would argue that those deficiencies manifest as the root cause of the torment many developing countries are suffering.

The very idea of insufficiency, or resource scarcity, pushes those with so-called technology and capacity to take over the management of the world’s resources. The idea of not having enough forces them to look elsewhere. Natural resources become the prima donna, and everyone fights over her.

Without the technology and capacity developed countries command, developing countries will always lose in a game of resource management and accumulation. This is why in the field of oil, gas, and mineral extraction, developing countries rabidly engage in joint venture agreements with foreign corporations from developed countries. The popular myth is that without foreign corporations, developing countries would not be able to extract its oil, gas, or minerals. According to economic schemes imported from developed countries, developing countries would not be able to extract those things “efficiently”.

Uneven playing field

In reality, the uneven playing field is exploited by huge corporations who wield a mighty bargaining power in domestic eco-political arrangements – which in Indonesia is usually just corruption – thereby dictating the rules for natural resource extraction in Indonesia.

The practical implications are not only frowned-upon, but also suffered by many people in Indonesia.

One can easily prepare a long, exhaustive list of how corporations – both local and foreign – have exploited and polluted this rich land, leaving behind toxic waste for the local people. From reports of Freeport’s alleged gross human rights violations in Papua and Newmont’s involvement in the destruction of local people’s livelihood in Sumbawa, to the pulp industry in Sumatra and the plethora of cases of mercury contamination of reservoirs, we see a small glimpse of the evils created by corporations.

This painful picture is replicated the world over. John Perkins, in “Confessions of an Economic Hitman”, describes the aggressive pursuit by foreign corporations of oil and natural resources in Ecuador, Indonesia, and Panama, where extraction plants are built for the benefit of elite groups of foreigners and their mercurial domestic counterparts, while waste and hazardous materials are left behind for the malaised locals. And Bretton Woods institutions (e.g. World Bank and International Monetary Fund) promote economic principles that allow for the continued exploitation of natural resources by foreign firms.  

Joseph Stiglitz, the 2001 recipient of the Nobel Prize for Economic Sciences, famously said that “most countries with large (production) of natural resources do more poorly than those without, which is an irony.”

The film “Blood Diamond” also depicts a related situation in African countries, where the exploration of diamonds leads to civil wars, disrupting a nation’s political stability and subjecting its people to torment and anguish. One character in the film vividly remarked: “I hope they do not find any more diamonds, otherwise we will start killing each other again.”

Though it may sound treacherous, there are times I almost wish this land were poor – and that may indeed be the wish of many Africans in Sierra Leone.

This is the “cancer” of the irony: People die sitting atop the riches of their lands, not because nature does not provide enough, but purely because of unrestrained human greed. – Rappler.com

Harjo Winoto is an Indonesian legal scholar/philosopher, economist, and social critic. In terms of career, he is the director of Consilium, Public Policy Advocates. He specializes in law & economics, and devotes his thoughts on public issues such as inequality, youth development, and legal pedagogy. Follow him on Twitter at @HarjoWinoto.