In many countries, the reliance on commodity money can be a double-edged sword. While it may seem like a simple solution to economic problems, it often leads to autocratic regimes that use it to maintain power and cater to certain groups. Moreover, wars tend to become more frequent in countries that heavily rely on natural resources. However, there are exceptions to this rule, such as Norway, Australia, Canada, Chile, and Botswana. These countries have managed to prosper and build democratic institutions despite their resource wealth.
Iran and Russia are prime examples of countries where the elite benefits from the wealth generated by natural resources while the general population struggles. Both countries face economic challenges despite their resource wealth and are subject to international sanctions. The gap between the elite and the rest of the population in these countries is significant, leading to social and economic issues.
Resource-rich countries often struggle with autocratic leadership, low economic growth, and inequality. The dependence on raw materials can hinder economic development and lead to conflicts as seen in Libya, Angola, and Sudan. To avoid falling into this trap, strong institutions, a functioning democracy, and responsible investment of resource revenues are crucial factors that can help countries escape the resource curse and achieve broad prosperity.
Civil society plays a vital role in demanding transparency and accountability from political leaders. By investing in diversification of the economy and ensuring that resource revenues benefit the entire population, countries can overcome the resource curse and build a more stable future.
In conclusion, while commodity money may seem like an easy solution to economic problems in some cases; it can also lead to autocratic regimes that use it for selfish gains rather than for the benefit of all citizens. Therefore, it is essential for nations with significant natural resources reserves to establish strong institutions capable of managing their resources responsibly while promoting democracy so that they do not fall victim
