False economy What’s in it for me? Understand what makes the

Natural resources can end up being more 
trouble than they’re worth.
You probably wouldn’t think that finding oil or a 
diamond mine in your backyard would be a bad 
thing. But for many countries, this kind of 
discovery has brought more economic chaos 
than prosperity.
Oil can bring economic stability, but only if you 
know how to manage it properly.
The oil-rich nation of Saudi Arabia might appear 
successful with a per capita income of $15,000. 
But it hasn’t been using that money to generate 
jobs. A closer look reveals an unemployment 
rate of 25 percent, a figure that is affecting many 
of the country’s young men.
And since half of Saudi Arabia’s male population 
is under the age of 22, the country is dealing 
with a large group of frustrated people. So it isn’t 
surprising that the nation’s society has become 
uneasy and volatile.
Let’s compare to Norway: the country has 
managed its oil resources well, putting any 
excess revenue into a national oil stabilization 
fund. The nation of Chile also uses a similar 
system for money earned from its copper 
resources. Stabilization funds like these allow for 
responsible spending and ensure that one 
natural resource isn’t relied upon as the only 
source of revenue.
African nations also reveal how a natural 
resource such as diamonds or copper can result 
in prosperity or unending turmoil.
The African nation of Sierra Leone is one of the 
world’s top diamond-producing nations. But the 
abundance of their natural resource led to illicit 
trading that helped prolong a civil war for eleven 
years.
In an effort to get rich quick, the African nation of 
Zambia pushed out foreign investors interested 
in their copper mines. But their inexperience and 
mismanagement of the resource has led to a 
highly unstable government.
The diamond-rich African nation of Botswana 
made a better decision by partnering with the 
foreign company De Beers. They established a 
long-term revenue sharing agreement, with De 
Beers handling the difficult task of managing the 
diamond mine. This allowed Botswana to create 
a national fund and achieve economic stability 
through a stable source of revenue.