" Professor of Economics, Edward Barbier, points out that, "any depreciation of natural resources must be offset by investment in other productive assets," in other words, he argues that institutions must counterbalance the deflation of commodity prices of any given natural resource by investing in other sectors of the country. However, he finds that in many developing countries resource rents are not channeled into productive investments, but are depleted through corruption, inefficient institutions and policies aimed at rent-seeking interest groups. .
Developing countries dependent on the wealth natural resources create policies for extracting resources and capturing rents, subsequently allocating those rents in ways that often privilege the elite rather than public investments that would enhance growth and collective social welfare. Natural resource-led development programs dependent on global commodity prices tend to be impractical. Terry Karl argues in her book, The Paradox of Plenty, that developing countries who are resource dependent tend to determine the revenues drawn from the resources in a competing, rather than a complementing manner like Norway. This leads to certain elements of "sameness" in terms of elite behavior, because of how a state extracts, collects, and distributes revenues defines its nature. The nature of a resource dependent developing country is highly determined by commodity prices. The high prices of a certain commodity would intensify rent-seeking practices, while low prices would ensue a hiatus in production, or a stockpile of resources until the prices ascended. Secondly, gas, oil, and mining resources are nonrenewable and exhaustible, limiting the extent which elites view decision-making on those sectors. Finally, extractive industries tend to be capital intensive, often having to rely on foreign investment, leading to very little linkages to other domestic economic sectors, resulting in the states sluggish growth.
