Resource Dependence, Economic Performance, and Political Stability

Abstract

In many resource-dependent states, elites may face an important trade-off between the economic benefits of diversification and the possibility for future political competition that diversification may engender. However, distinctive features of global resource markets and national political economies may make diversification more or less attractive to political elites. The author argues that in three cases which illustrate the equilibrium paths of the game-theoretic model developed here—postindependence Bostwana, Mobutu’s Zaire, and Suharto’s Indonesia—three variables influenced elites’ incentives for diversification and thereby shaped outcomes along the dimensions of political stability and economic performance: the world market structure for the resource, the degree of societal opposition to elites, and the prior development of the nonresource private sector. These countries’ varied paths from resource wealth to political and economic outcomes suggest the need for conditional theories of the resource curse.