I've said for years that Alaska's leaders were blinded by Alaska's resources, that instead of acting like a colony -- importing finished goods and exporting raw resources -- Alaska should turn instead to clean, value-added manufacturing because trade favors manufacturers over resource exporters, and because adding value (by education and manufacturing) earns economic rewards.
James Surowiecki's article "The Real Price of Oil," published in the Dec. 3 New Yorker, confirms these ideas.
Surowiecki cites economists Jeffrey Sachs and Andrew Warner's 1995 study of 97 developing countries, which showed that "the more important natural resources were to a country's economy, the lower its growth rate was." This fact they call "the resource curse."
Surowiecki writes: "Being dependent on natural resources makes a country less likely to invest in other things that might be economically valuable, especially manufacturing." The failure to invest in manufacturing hurts, he adds, "because manufacturing, with its competitive pressures and its demand for technological innovation, is a key source of growth."
As Alaskans know, "natural resources are depleted over time, with the benefits of technological innovation actually increase."
Some resource-rich countries overcame the resource curse by using "their resource wealth to diversify their economies." Surowiecki says they started special export zones to encourage manufacturing, devalued their currencies, opened markets to free trade, and invested heavily in education.
He reports many oil-producing nations took no such actions and have little manufacturing and less technological innovation. "They spend far more time fighting over how to divvy up the spoils than over how to create new wealth, which means every economic decision becomes a political one."
If so, Alaska should look to exceptions -- Surowiecki cites Chile, Malaysia, Indonesia and Mauritius -- for lessons on how to grow despite being cursed with resources.
Joe Sonneman, Ph.D.
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