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What is the connection between a nation's natural resources and its standard of living?
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It would be convenient if we could simply explain differences in productivity and economic growth based on how large, or how small, a nation’s resources are. Consider the United States, a nation blessed with abundant resources. The temperate climate is suitable for growing a wide variety of crops and vast mineral deposits helped spur economic growth. Similarly, Canada and Australia have plentiful natural resources and high standards of living. The connection between natural resources and growth seems pretty clear – abundant natural resources lead to greater productivity and more economic growth.
If only it were that simple. Brazil and Russia are also blessed with an abundance of resources. However, the per capita income is low in these countries compared with many developed nations. In addition, consider nations like Japan, and Luxembourg, which have a high living standard but are comparatively poor when it comes to natural resources. Japan and Luxembourg prove that a country need not have its own natural resources to achieve a high standard of living. While Brazil, Russia, and Peru prove that an abundance of natural resources do not guarantee a high per capita GDP.
Resources are helpful, but a nation’s standard of living also depends heavily on its access to technology and on it’s political and cultural institutions.
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