The place of natural resources in an economy

"I can’t abide the assumption that just because a country sits on top of natural resources, it is potentially rich.

It is now conventional wisdom that the Arab economies are "failures" because they have wasted
their oil wealth. After the recent depth of Jonas Savimbi, the Angolan guerrilla leader, we were told that his nation should be one of the richest in Africa–all those diamonds and precious metals under the
jungle, you see."

by Michael Elliott Time Magazine

"Gimme a break. resources are a curse as much as a blessing, for two reasons. Over time technological change reduces the relative price of commodities, and the presence of abundant resources skews
incentives. Extracting wealth from the ground can look so easy that others sectors of the economy are starved of investment. Apart from Australia and Norway, it is hard to think of resource-rich nations that
have used their natural endowments to build balanced economies. By contrast, some of the world’s riches nations–Denmark, Japan, Switzerland–got that way without any significant stock of natural resources."

But they all had something else: human capital. Over the past 20 years, economists have come to believe that a central determinant of a nation’s economic growth is the skill base and entrepreneurial moxie
of those who live there. Human capital is a function of education, which is why successful Asian tigers (like Singapore) and fast-growing developing countries (like Mozambique) put so much stress on the
quality of their schools."

CG NOTE: The phrase "skill base and entrepreneurial moxie" is probably the best summation of what we believe is the core of economic gardening. And we think it is fractal….that is, it looks the same at all
levels. Resource based communities are in just as much danger as resourced based nations.

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Thanks to Dave Bayless for passing this along and his comments to Chris Gibbons who found the article:

Chris:

Thanks! I just forwarded your reference to Michael Elliott’s recent column in Time magazine to the Montana Economic Development Action Group, which was convened by Senator Max Baucus and adopted
by Governor Judy Martz.

In order to raise its personal income back to within spitting distance of the national average, Montanans will have to double their rate of productivity growth over the next twenty
years.

In a knowledge based economy, skills and entrepreneurial moxie will be needed in abundance, if we are to succeed.

Yours,

W. David Bayless
Bayless & Associates, Inc.