Should Canada Worry About a Resource Curse?

The School of Public Policy Publications, Volume 7, Issue 2, January 2014

28 Pages Posted: 30 Nov 2017

See all articles by Alan Gelb

Alan Gelb

Center for Global Development

Date Written: January 21, 2014

Abstract

An abundance of natural resources might seem like something any nation would want to be blessed with. But in some countries, a bounty of energy, minerals and other resources can become as much a curse as a blessing. The difference between whether resources benefit a country’s people, or lead to adversity and even suffering, has everything to do with how a country manages its resources. It is the difference between a resource-rich, free and democratically accountable country, such as Canada, and a resource-rich, corrupt, violent and impoverished country, such as the Democratic Republic of Congo. In many resource-rich countries, the effect of ample natural wealth has been to sever the accountability link between citizens and government, slowing or even reversing democratic and social progress, while mostly enriching a few politically favoured constituencies.

Canada’s plentiful resources are an indisputable blessing, and those critics of federal industrial policy who compare this country to illiberal and corrupt “petro-states” are being either ignorant or deceitful. There are numerous critical factors at work here that ensure that the Canadian public benefits, rather than suffers, from our natural endowments. We have a diversity of resources, as opposed to being reliant on a single commodity, and our natural-resource sector makes up only a small portion of our larger economy. We have well-established and diligently enforced standards for financial transparency and accountability, in both the private and public sectors. But, just as importantly, there is a national consensus in Canada that public wealth amassed from resource rents should be invested in strengthening human capital, through education, training and social services, as well as in improved infrastructure and better governance, eventually parlaying natural-resource wealth into a yet larger, further-diversified economy.

But Canada — and especially resource-rich provinces, such as Alberta — cannot take these factors for granted. A combination of complacency and natural wealth has the potential to turn a blessing into a curse. Even once reasonably democratic and accountable countries, such as Venezuela, have been caught unprepared on the dangerous double edge of a resource boom and have seen their governance systems substantially eroded. Developing the fiscal capacity to withstand commodity-market shocks, creating effective and durable checks and balances on systems of legislative power, enforcing transparency in budgeting and public-investment management, and maximizing tax efficiencies and tax administration, are all areas where Canadians can and should focus their efforts. These are the fundamental safeguards that will ensure our ample natural resources continue to be seen by our citizens as a blessing and not — as is the unfortunate case in so many other countries — a curse.

Suggested Citation

Gelb, Alan, Should Canada Worry About a Resource Curse? (January 21, 2014). The School of Public Policy Publications, Volume 7, Issue 2, January 2014, Available at SSRN: https://ssrn.com/abstract=3078380

Alan Gelb (Contact Author)

Center for Global Development ( email )

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