Question

Based on the article "The Twilight of the Resource Curse?" please answer the following question: the few African nations have been able to avoid the "resource curse" have done so by:

a) maintaining a fixed distribution or allocation of their GDPs across consumption, net exports, private investments and government spending thus stabilizing their economies.

b) reducing private investment and increasing government spending to subsidize their country's exports which have stabilized their economies.

c) cutting off foreign trade thus moderating the business cycle.

d) expanding of shifting into private investment relative to net exports ( as percentages of GDP)

Answer 1

a) The continent lacks consistency, though there have been significant improvements since 2000. The GDP has to be uniformaly disturbuted to accelerate the trickle down effect. Even with some amount of growth in the economy, African countries still remain as one which are struggling from poverty and low income and living standards. Hence, this as[ect of making sure the GDP is allocated as per various gains from different economic parameters.

b) Africa cannot just sustain on private players, but each government of the continent has to take some action in order to stabilize their economy. Private investment cannot deal with the growing poverty concern and neither of the falling living standards. The policies of the government has to be well framed for the economies to break the monotony of poverty and lower living standards. They should not forget that 6 among seven fastest growing economies are in Africa.

c) Cutting foreign trade is not a solution but can be a measure. Africa accounts for 1/3rd of the world's mineral and other natural resources. Hence, it cannot be possible that total foreign trade is eliminated. However, to secure the economies from the market harshment, the government can propose for a balanced outcome and policies for both domestic and foreign trade.