Rich land, poor people syndrome
Regions rich in natural resources too often fall into vicious cycles that impoverish people and damage the land while channelling profits away from local communities. This negative path of development is sometimes called a “rich land, poor people” syndrome, or a “resource curse”. It results from:
- direct impacts: costs to local communities from extractive industry, such as damage to human and environmental health, loss of cultural assets & livelihoods from loss of land, strain on public services, reclamation costs, damage to roads and other infrastructures; and
- indirect impacts: macrostructural forces that drive boom and bust cycles of extraction, and create negative feedback loops.
Well-designed public revenues can mitigate the effects of the resource curse. A major cause of the resource curse is the volatility of fossil fuels in global markets. Governments can design public revenues to offset this boom and bust tendency. Deposited into a permanent, interest-bearing fund, public revenues can become a counter-weight, tempering the effects of chronic boom and bust cycles. Unlike other developed countries, the U.S. does not have national sovereign wealth funds to mitigate the boom and bust cycles of fossil fuels. There are, however, funds within the U.S. that can be leveraged to mitigate the negative effects of the resource curse, including:
- the federal Abandoned Mine Land fund, which now has over $2.5 billion dollars, and is a key component of the POWER plan and proposed legislation (e.g., the RECLAIM ACT), which would channel many millions of dollars into economic diversification and ecological reclamation in distressed coalfields, especially in Appalachia; and
- permanent "Natural Resource Trust Funds" in several high extraction states, which are described on the U.S. Extractive Industry Transparency Initiative website (scroll to bottom of page and click on "Natural Resource Trust Funds.")
Public revenues for public goods: If a local or regional economy becomes dependent on one extractive industry, it is at risk of falling into a resource curse syndrome. Global markets in natural resources tend to swing dramatically from boom to bust. If a local economy is too dependent on one sector for jobs, public revenues, and exports, it tends to become more and more vulnerable. In addition, extractive sectors tend to crowd out other sectors, thereby stifling economic diversification. Therefore, it is important for citizens to be able to monitor local and regional government spending to make sure they invest in the public services and public goods that are needed for economic diversification and resilience. The foundation of a healthy economy is a citizenry that is educated, healthy, and secure, with ample access to resources that enable the exploration of new ideas and possibilities.
- direct jobs as % of total employment
- absolute size and % of GDP
- government revenues, absolute and as % of government revenues
- exports. absolute value & volume and as % of total exports
- public revenues