Resource Curse - Robin's Theory on the Paradox of Plenty

The "Resource Curse" is described well in the opening of the Wikipedia entry...
"The resource curse (also known as the paradox of plenty) refers to the paradox that countries and regions with an abundance of natural resources, specifically point-source non-renewable resources like minerals and fuels, tend to have less economic growth and worse development outcomes than countries with fewer natural resources."

One theory is that the concentration of wealth from a raw material source provokes military coups and use of violence to take control over the fountainhead.   Those activities are inefficient and retard economic and social development.   Sounds plausible, but resource-rich nations like Saudi Arabia have not had coups (at least, since the days of Ibn Saud).

My hypothesis is that young people are attracted to jobs. If the best jobs are doling out government handouts, or running defense networks, or brokering government controlled easements to forests and oil fields, that is where the youth competes for jobs. There are not many engineering jobs (for locals) created at an oilfield operations in comparison to government jobs administering shares of that resource. What skills are rewarded in competiton for those cushy "functionaire" jobs is the problem.

For young career-seekers, the job skills that matter in those resource-rich, "command and control" economies, are probably "personality skills" and "connections" rather than technical education. Aggressiveness, popularity, personal connections, charisma, name recognition, other leadership qualities, probably trump reading, writing and arithmetic.

A national government without a natural resources "tax base" is stuck taxing small business and agriculture. That country is not likely to have as many government jobs that would attract 20-somethings, in comparison to the "resource rich" nation. There are relatively fewer cushy government jobs for the same number of candidates, which would leave some smart and talented people looking elsewhere. One indicator of test of that hypothesis would be that you'd expect more overseas medical school applications per capita from a country like India, and fewer from Kuwait.

In a resource poor country like 1950s Singapore, South Korea, or Japan, I would predict that more young people would make money by repairing high tech stuff. TV repair, monitor repair, engine block repair, etc. were all prevalent in these countries three decades ago, because a person with knowledge can learn a skill (circuitry schematics).   When the jobs are in technical repair, I would expect that kids stay in school, and that families reinforce knowledge and study skills rather than aggressiveness and charisma.

Reminder from previous posts, this is a rough outline of the "evolution" of the technical manufacturing market in places like Guangdong, Singapore, etc.
  1. Repair is taking an appliance from a consumer and fixing it to give back to the consumer.
  2. Refurbishment is taking appliances (scavenged or purchased) to repair to sell to a 3rd party consumer.
  3. Contract manufacturing is running a company on behalf of an OEM which chooses to outsource the manufacture. Counterfeiting is basically doing the same thing, but without the OEM's permission or revenue sharing. Either one can be done with used parts... with or without the knowledge of the OEM. This whole area is called the "gray market".
  4. Reverse-engineering is taking working and non-working used appliances and taking them apart and putting them back together again to learn how to manufacture new ones, and making your own OEM brand.

My theory is that all of these activities bring in very high wealth in comparison to fishing or agriculture, leading to Buffet-esque growth in nations which can get their hands on large quantities of appliances to repair from developed countries. The Natural Resources curse is to the degree it distracts smart people who could be on the mechanical path to growth, and either brings them into non-productive government sectors or makes new products affordable (less need or value in repair), or both.

Here is a slide show from Cairo which shows how the business works.

E-waste piles in such a place would be residue from a value-added operation. As the nation succeeds and develops, it will (in this interpretation) lift its buckets as it climbs, and develop environmental procedures. The ewaste will be cleaned up more quickly if a fair trade contract is implemented to offer incentives

This dovetails with another theory I may have already written about, which says that displaced peoples (Jews, Palestinians, Bamilekes, Taiwanese) quickly free the percentage of "first born" tied to agriculture. Take two families with three kids who own land - one of the three kids has to stay to caretake or preserve the family's property, leaving only two for medical school, engineering, or remanufacturing. The displaced peoples will be allowed send a higher percentage of their children into higher education or trades. Statistically, this would result in higher income per capita.

It is unheard of that a displaced people gets chased into a resource-rich place, though I have a third "Beverly Hillbillies Bedoin" theory about what happens when the least educated, poorest, most ignorant and religious group suddenly finds wealth.

"Let me tell you all a story about a man named Jed..."

The slides of my visit to the Egypt repair operation, Medi-Com (which was refurbishing computers for resale to medical schools and med school students in Cairo) are from a partner from a Palestinian family. You know what SUCKS? The BAN and Greenpeace press about "dumping in Africa" screwed this up.

There are a lot of days that I feel very frustrated. While is pairing do-gooders with businesspeople overseas to develop sustainable jobs, other do-gooders are, hopefully without intention, screwing up these peoples' sustainable, development-track, operations. The ban on ewaste exports takes away the development path which brought prosperity to Signapore, but they don't want to allow us to replace it with a fair trade alternative. And BAN is ignoring my pleas to promote a "fair trade" solution, labelling me a self interested, selfish, self serving businessman. And an "apologist" for ewaste dumping.

BAN will probably win this argument in the popular media. The ewaste legislation is passing. The OEMs know how to raise the barrier to entry for competitors, and are anxious to stop counterfeiting and reverse engineering and market cannibalization. Some companies with a lot more money than Las Chicas Bravas has are circulating a story that export for repair is illegal under the Basel Convention (it is explicitly stated, in writing, that export for repair and refurbishment is LEGAL, is not waste, is a commodity! This is like saying "The Bible never mentions Jesus", citing the source (Basel Convention) to state the opposite of what the source says. "Tested" is not in the Basel Convention, the convention states that you look at the process and determine whether export of Annex VIII pollution is the result or the intent of the trade. That requires a fair trade contract, and measure of the fallout, and reconciliation of the waste. Like WR3A does, and like MPPI calls for.

What's great is that I can publish a blog, and that people at MIT and in India and in Peru and in China are reading it and sending me encouragement, and that history will test whether my hypotheses are valid.

Or maybe I'm all wrong. I like learning I'm wrong. There are several things I was fascinated by in the past (Mars polar caps changing, could it be a signal that climate change is affected by other than human intervention? I get a good explanation, and I don't keep writing about it). When you keep repeating something you have learned is wrong, it is either a sign of self interest or of stupidity. BAN's theory is that I am self-interested. My banker's theory is that I am not sufficiently self-interested.

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