The ‘Resource Curse’ is Alive and Well in the U.S.

When discussing the “resource curse,” we usually think developing nations, as in Middle East oil and gas and the region’s volatile geopolitics; oil’s contribution to social problems in nations such as Nigeria and Venezuela; and the impact that “conflict minerals” has had in countries such as Congo.

But another version of the resource curse, also known as the paradox of plenty that can afflict countries blessed with abundant natural resources, is alive and well in some parts of the U.S., including the Rocky Mountain region.

As economics reporter Andrew Van Dam recently profiled in the Washington Post, Idaho and Wyoming share far more in common than a boundary. In the 19th century, they were even part of the same territory before Wyoming was split off; both became U.S. states in 1890. They share similar topography, are blessed with abundant natural beauty and boast that indomitable frontier spirit and Old West culture.

But Idaho is currently the fastest-growing U.S. state in population, while Wyoming has had the largest population decline (by percentage) out of all the U.S. states during 2017. The state with the second-largest population decline is West Virginia, where the population has decreased to the point that one of its U.S. congressional seats is in jeopardy.

What do Wyoming and West Virginia have in common? Van Dam points out Wyoming and West Virginia are largely dependent on mineral extraction; furthermore, coal mining dominates those states’ economy. Wyoming is the U.S. state most reliant on mining and energy, with over 20 percent of the state’s economy tied to those sectors. West Virginia comes in at third, with 11.5 percent of its economy dependent on the extractives sector. Wedged between them is Alaska, at just over 15 percent.

Meanwhile, while Texas has long enjoyed the reputation as the state with the most robust energy sector, that state’s economy has long been diversified to the point that energy and mining currently comprise just under 7 percent of its total economic output.

Contrast those percentages with Idaho, where less than 1 percent of the economy is driven by mining and energy. But Idaho’s economy has also diversified, with technology, advanced manufacturing, business services and agriculture the main drivers of job growth in the state. The state of 1.7 million has long evolved from its origins, when a gold rush during the 1880s helped set the foundation for statehood. Now, young workers and families are flocking to Idaho’s capital, Boise, where the cost of living is low and jobs are relatively plentiful.

Wyoming, with a population one-third of Idaho’s, has an economy largely centered on energy, tourism and agriculture. What may be a draw for many visitors – cattle outnumbering people two-to-one, plenty of wide open space and a quiet lifestyle – also has a flip side, as in the struggle to attract and keep businesses and entrepreneurs. The state has launched an innovative program that strives to convince former Wyoming residents to move back, but the state’s business and political leaders need more ideas while they sort out how to diversify the state’s business portfolio.

In addition, boom and bust cycles continue to mark Wyoming’s economy. Even though the state’s coal sector has stolen much thunder from Appalachia, prospects for employment in that sector are far from promising – especially since coal in the state’s Powder River Basin is much easier to extract thanks to automation.

Van Dam sums up the economic potential in Idaho and Wyoming, which can also serve as a reminder to states that pin long-term growth on energy:

“It’s the tired old parable of two siblings, separated at birth. One began with natural gifts and found little incentive to grow beyond them, and another was forced to play a weaker hand but became stronger and more resilient in the process.”