Venezuela sits atop the world's largest proven oil reserves, yet its citizens flee economic collapse and empty supermarket shelves. Meanwhile, resource-poor Singapore transformed from a swampy island into one of the world's wealthiest nations in just fifty years. This puzzling reversal of fortune isn't unique—it's a pattern that has shaped global development since the 1960s.

The 'resource curse' defies common sense: shouldn't countries blessed with oil, diamonds, or minerals naturally prosper? History tells a different story. From Nigeria to Libya, from Angola to Iraq, natural resource wealth has more often brought corruption, conflict, and economic stagnation than prosperity. Understanding why requires examining how oil transforms not just economies, but the very relationship between governments and their people.

The term 'Dutch Disease' emerged in 1977 when The Economist analyzed the Netherlands' economic decline following natural gas discoveries in the 1960s. As gas exports boomed, the Dutch guilder strengthened dramatically, making other exports uncompetitive. Manufacturing collapsed, unemployment rose, and the economy became dangerously dependent on a single commodity. This pattern has since repeated worldwide, from Saudi Arabia's struggling non-oil sectors to Russia's deindustrialization after Soviet collapse.

When oil money floods an economy, it creates a cruel paradox. The local currency appreciates, making imports cheaper and exports expensive. Why manufacture textiles when you can import them for less? Why develop technology sectors when oil revenues dwarf any other potential income? Agriculture withers, manufacturing relocates, and entire generations lose industrial skills. Nigeria, once a major agricultural exporter, now imports most of its food despite having fertile land and millions of unemployed workers.

The damage extends beyond economics. Resource economies create few jobs—modern oil extraction employs surprisingly few people compared to manufacturing or services. Young Saudis study petroleum engineering while their economy desperately needs diversification. Educational systems orient toward extractive industries rather than innovation. When oil prices eventually crash, these nations find themselves with neither the industries nor the human capital to adapt, trapped in boom-bust cycles that destroy long-term planning and development.

In 2011, as Arab Spring protests toppled governments across the Middle East, oil-rich Saudi Arabia and UAE remained stable. Their secret wasn't military might alone—it was the fundamental bargain of petro-politics. When governments fund themselves through oil rather than taxes, they don't need their citizens' consent to govern. This 'no taxation, no representation' reversal has shaped political development across resource-rich nations since decolonization.

Oil revenues transform the social contract. Instead of citizens paying taxes and demanding accountability, governments distribute oil wealth through subsidies, public employment, and welfare programs. Saudi Arabia employs two-thirds of its citizens in government jobs. Gulf states provide free healthcare, education, and even marriage bonuses. But this largesse comes with an implicit bargain: economic benefits in exchange for political silence. When protests emerge, governments can simply increase handouts—Saudi Arabia distributed $130 billion to citizens during the Arab Spring.

This dynamic explains why oil discoveries often coincide with democratic backsliding. Russia's authoritarian turn accelerated as oil prices rose in the 2000s. Venezuela's democracy crumbled as the government used oil revenues to bypass institutional constraints. Resource wealth insulates leaders from public pressure, enabling them to buy loyalty, fund security forces, and survive economic mismanagement that would topple tax-dependent governments. The result: of the world's twenty most oil-dependent economies, only Norway ranks as fully democratic.

When Norway discovered North Sea oil in 1969, experts predicted another resource curse victim. Instead, Norway became the exception that proves the rule. The key? Timing and institutions. Norway had already industrialized, democratized, and developed strong governing institutions before oil arrived. Rather than spending oil revenues immediately, Norway established a sovereign wealth fund in 1990, now worth over $1.4 trillion. Oil revenues flow into the fund, and the government can only spend the returns—about 3% annually—forcing fiscal discipline and preventing Dutch Disease.

Botswana tells an equally remarkable story with diamonds. At independence in 1966, Botswana was among the world's poorest nations. Discovery of massive diamond deposits could have triggered the usual resource curse. Instead, Botswana's leadership, particularly founding president Seretse Khama, made crucial decisions. They negotiated favorable terms with De Beers, invested diamond revenues in education and infrastructure, and maintained democratic institutions. Most importantly, traditional Tswana governance culture emphasized consultation and consensus, creating accountability mechanisms that survived the influx of diamond wealth.

These successes reveal the curse isn't inevitable but requires specific conditions to break. Both countries had either strong institutions or exceptional leadership when resources were discovered. Both created mechanisms to prevent revenue volatility from disrupting their economies—Norway's fund, Botswana's partnership structure with De Beers. Both maintained diversified economies rather than abandoning other sectors. For countries already cursed, the path forward remains challenging but clear: transparent resource funds, gradual economic diversification, and rebuilding the social contract beyond simple redistribution.

The resource curse reveals a profound truth about development: wealth alone doesn't create prosperity. The countries that transformed natural resources into lasting development—Norway, Botswana, Chile with copper—succeeded not through geological luck but through institutions that channeled resource wealth productively rather than destructively.

As the world transitions toward renewable energy, understanding the resource curse becomes even more critical. Countries dependent on oil exports face existential challenges, while nations rich in lithium, cobalt, and rare earth minerals risk repeating history's mistakes. The lesson from seventy years of development history is clear: how societies manage natural wealth matters far more than how much they possess.