Countries who control large swaths of natural resources are expected to have an advantage when it comes to economic growth and prosperity. However, in many cases, an abundance of natural wealth often has a negative effect on a country often leading to fractured economic growth and curtailment of fundamental rights and democracy. This phenomenon is termed as the 'Resource Curse'.

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While the idea of the abundance of natural wealth having an adverse impact on a country and people dates back to the 18th century, it is generally accepted that the idea got widespread acceptability in the post world war world. Many economists across the world started to observe during the era how many resource-rich nations were plagued with inequality, low development and absence of democracy.

When a particular resource becomes the key engine for revenue for a particular economy, then the economy becomes focused on the development of that particular segment leading to a fall of development in other segments and sectors. Also with high revenues garnered from the sale of the resource, the country’s currency becomes often stronger leading to a fall in exports and rise in imports, thus further weakening the local economy.

Further, the uncontrollable flow of income from a limited source leads to the concentration of wealth in the hands of a few, leading to the rise of inequality and widespread corruption.

And to make the matters worse these economies will be incapable to deal with a setback when the demand for the particular resource decreases as they do not have the cushion of other sectors to absorb the falling price of the particular resource such as oil.

The phenomenon is mostly seen in underdeveloped or developing countries that experience a sudden discovery of a valuable natural asset. In the modern period, the best example would be Saudi Arabia and Venezuela whose economies are dependent on natural gas and petroleum wealth.