The announcement, apparently by the Pentagon, of significant mineral deposits in Afghanistan, perhaps totaling a trillion dollars in value, was greeted by many with enthusiasm. Compared with Afghanistan's current economy, which is heavily dependent on opium production, this may seem like a real upgrade.
But research suggests that extractive industries may not be good for growth. Sachs and Warner (EER 2001) show that levels of income and rates of growth have both been lower in countries with abundant natural resources. They posit that because such countries tended to have higher prices, their exports, especially in manufacturing, were less competitive, which retarded growth.
The other thought that immediately comes to mind is that natural resource wealth and liberal democracy do not seem to be correlated. But Sachs and Warner point out that liberal democracy is not tightly correlated with growth, however.
