Many countries with natural resources suffer from the resource curse. The money from natural resources does not usually benefit the people of a developing country. It might not even go to the people who own the land. Instead, the money goes straight to the government or into the pockets of a small class of elites. One way that the resource curse can affect a nation is by turning it into a rentier state. Governments in a rentier state don’t need to tax their citizens. They use money from their natural resources to give every citizen a high quality of life that includes a good job, health care, and education. This may sound good, but it can be bad for a nation’s economy. A stable economy should have many different industries and businesses. That way, if one industry has a crisis, the rest of the economy won’t fall apart. The most extreme rentier states in the world are nations with lots of oil, such as Saudi Arabia and the United Arab Emirates (UAE). Up to 90 percent of the money earned in these countries each year come from oil production. A rentier state does not need its citizens to pay taxes to fund the government in the same way a non-rentier state does. For example, in 2019, 47 percent of the Democratic Republic of the Congo’s GDP came from companies paying rent to extract natural resources. With only half of the GDP coming from its citizens, the relationship between citizens and government is weaker. Rents can also support governments that commit human rights violations. The DRC’s government has been accused of many human rights crimes, but multinational corporations continue to pay it large amounts of money. Where the Money Goes Money paid on rents is sometimes stolen by corrupt members of the government. It is also often distributed more unequally than taxes. The countries of the Arabian Gulf are one example of this. The royal families in these oil states take a large percentage of oil rents as their own personal wealth. The royal family of Saudi Arabia, pictured here on the national currency, rules the country with absolute authority and controls most of the country’s oil revenue. Source: Fedor Selivanov/123RF For example, most citizens in Saudi Arabia work for the government and earn an average of about $37,000 per year. But the net worth of the Saudi royal family is estimated at $1.4 trillion. That means each of its 15,000 members is worth over $90 million on average. This is just one measure of the inequality between royal Saudi citizens and normal Saudi citizens. The economy also relies on millions of migrant workers who only earn $3,000 to $5,000 per year. Hard to Make Reforms Change in a rentier state is extremely difficult. Those who profit do not want reform and often support corrupt practices for their own benefit. For example, a ruling party can use rents from multinationals to pay bribes and fake an election instead of holding a real election. Conflict is common in rentier states. It often takes a violent revolt to change the situation. But those in power have enough money to pay armies to stop revolution. In more stable rentier states, citizens are faced with a difficult “choice.” In exchange for good jobs, health care, and education, many citizens accept the situation as it is. Speaking out against the government is risky. In some countries, those who speak out may be imprisoned, exiled, or even executed. This is why the corrupt use of natural resources has continued with little change for many years.

Question

Summarize this in a shorter paragraph

Answer 1

The resource curse affects many countries with natural resources, leading to a rentier state where the government relies heavily on income from natural resources. This can result in unequal distribution of wealth, with the ruling elites benefiting the most. Corrupt practices, human rights violations, and lack of economic diversification are common in rentier states. Reforms are difficult to achieve as those in power resist change, and citizens may face consequences for speaking out against the government.