Introduction

In this work, we highlight the “lessons from history” that can be drawn from a historical discussion and understanding of the past and present of resource-rich developing economies to obtain conditions for successful natural resources-based development.

The conceptual core of our answer to those questions will be based on three key ideas.

First, abundance of natural resources is closely associated with levels of economic development.

Second, we emphasize that an abundance of natural resources is not a fixed situation. It is a process that reacts to changes in the structure of commodity prices and factor endowments, and progress requires capital, labour, technical change and appropriate institutional arrangements.

Finally, history shows that institutional quality is the key factor to deal with abundant natural resources and, especially, with the rents derived from their use and exploitation. The ways in which natural resources interact with economic development are mediated by the performance of institutional arrangements in at least three dimensions: (i) institutions’ ability to limit rent-seeking opportunities that divert innovation and resources from productive avenues; (ii) political competition and participation relate to rules governing chief executive recruitment and selection, the fairness and impartiality of electoral processes, and constraints on executive power; and (iii) the characteristics of institutions that reduce transactional risk through proper enforcement of property rights.

In sum, history is very clear in showing that natural capital is non-neutral for economic performance but it is a systemic component of economic development where institutional quality is the key component to deal with and create “curses” and “blessings” of natural resources.