Development of the Chilean mining industry – its dependence of natural resources

Abstract: The resource curse, also known as the “paradox of plenty”, basically states that countries that have natural resources in abundance, particularly in terms of non-renewable resources such as oil and gas and minerals, in the long run tend to have less economic growth and prosperity, than countries with relatively lesser endowments of natural resources. This research investigates the case of the Chilean economy; its erstwhile saltpeter mining industry and current copper mining industry. The study attempts to answer the research question of whether Chile is still under the resource curse. Through the facts of the case study, semi-structured formal and informal interviews and extensive literature review, the researcher identified four main outcomes of the resource curse which are true to the Chilean history and current events; plundering of national wealth by political leaders, weak policy enforcements and military challenges to the government and the subsequent threats to the country’s democracy. The results of the case study suggest that, Chile is indeed still under the resource curse. The researcher draws on economic theory by Joseph Schumpeter in his most celebrated publication, “The theory of Economic Development” to gain understanding into the Chilean reality of economic under development and any other possible factors besides the resource curse, mainly lack of entrepreneurial ambitions by the human capital of the economy. The study contrasts, Schumpeter’s economic theory to Marxist economic theory of total control of nation states’ resources by governments and the Keynesian economic theory of government intervention aimed at supporting growth.