The Efficiency of Resource Based Economy

A country that has a large reserve of natural resources, in addition to obvious advantages, inevitably faces the problem of their rational use. In such cases, it is very difficult to mitigate the deformation of the economy because of the high profitability of a particular sector. It is quite difficult to maintain stability in the social sphere, since the volatility of prices for resources in the world market is very high, hence, well-being is also very changeable. As a result, in the country suffering from the Dutch disease, the most developed are the extractive industry and the services sector (because there is no competition with the international market). However, there are examples of successful resource economies: Norway, the United Arab Emirates, Australia, and so on. These countries, by virtue of their peculiarities and proper economic policies, succeeded in creating political institutions for the effective allocation of rent, and also to develop to some extent alternative sectors. Therefore, it should be noted that the resource curse can be avoided in cases of skillful attraction of foreign capital and specialists, subsidizing promising emerging industries, creating an effective legal system for protecting private property, and keeping the money supply in reserve funds.