Why Countries Rich in Resources Often Remain Poor

The Democratic Republic of Congo produces around 70 per cent of the world’s cobalt . Guinea holds some of the planet’s largest bauxite reserves. Zambia has exported copper for more than a century. Ethiopia’s coffee accounts for 30 to 35 per cent of its total export earnings, and the livelihood of roughly a quarter of its population depends on the coffee value chain. Yet these countries remain, by most development measures, among the poorer economies in the world. The question this pattern raises is not rhetorical. If these countries possess the raw materials that modern industry, technology and daily life depend on, why do they capture so little of the wealth those materials generate? The answer is not primarily about corruption or governance or bad luck, though all of those play roles in specific cases. It is structural: the wealth created by natural resources is not evenly distributed along the chain between the mine and the consumer, and the countries that do the extracting have historically been stuck at the least lucrative end of that chain. Where Value Is Actually Created Mining and harvesting are only the beginning of what happens to a natural resource before it reaches a consumer. A commodity typically moves through processing, refining, component manufacturing, assembly, branding, distribution, retail and finance before it reaches the person who pays for it. Each stage adds value. The countries that dominate the later-stage processing, manufacturing, intellectual property, and branding capture most of the margin. The countries that supply the raw input capture a fraction of it. Coffee makes this visible in its most straightforward form. Ethiopia is the birthplace of the coffee plant, the continent’s largest producer, and one of the world’s most significant exporters of high-quality Arabica. A smallholder farmer in Oromia might sell their coffee at the farmgate for a price per kilogram that represents a small fraction of what that same coffee will retail for in a European or American café, once it has been roasted, branded, packaged and distributed by companies whose headquarters, intellectual property and shareholders are located thousands of kilometres from the farm. The Ethiopian government’s own national coffee strategy explicitly identifies this gap as the central challenge: the country produces a sought-after product yet still struggles to capture the value it generates because roasting, branding, and consumer-market access are controlled at the consuming end of the chain. From Copper to Smartphones Minerals work in the same way, with the added complexity that most undergo multiple transformation stages before they appear in a finished product. The DRC produces roughly 70 per cent of global cobalt, but cobalt becomes economically meaningful only after it has been refined into battery-grade materials, incorporated into cathodes, assembled into battery cells, integrated into battery packs, and installed in electric vehicles or smartphones sold by companies like Tesla or Apple. China dominates the midstream and downstream stages of this chain , processing between 70 and 95 per cent of global lithium, cobalt, phosphate and graphite as of 2024, producing 98 per cent of LFP cathode material and over 80 per cent of global battery cells. The mine in the DRC earns revenue from selling ore. The battery manufacturer, the technology firm and the brand capture the margin from selling the finished product. The gap between those two positions in the chain is where most of the wealth disappears. The Ladder That Gets Pulled Up Ha-Joon Chang, in his analysis of how today’s wealthy countries actually developed , makes the argument that Britain, the United States, Japan, South Korea and Germany all used industrial policy, trade protection and state investment to move up from raw material exporters to manufacturers and eventually to technology and service economies. They did not remain exporters of primary commodities and grow wealthy. They built processing, manufacturing and eventually innovation capacity before competing freely on global markets and then, once developed, often argued that other countries should adopt free trade without the protective policies they themselves had used to develop. The countries that have managed partial escape from commodity dependence in recent decades have typically done so by refusing to remain raw material suppliers. Botswana negotiated a partnership with De Beers that required diamond cutting and polishing to take place domestically, capturing more of the value chain within the country rather than exporting rough diamonds for processing elsewhere. Indonesia banned the export of raw nickel ore in 2020 , forcing international buyers to invest in domestic processing. The results were significant: former President Joko Widodo credited the policy with increasing Indonesia’s nickel export value from 17 trillion to 510 trillion Rupiah , and by 2024, Indonesia accounted for 58 per cent of global nickel production, with 43 smelters operating domestically. But the Indonesia case also illustrates the limits. By 2024, 82 per cent of Indonesia’s nickel exports went to China , which had provided much of the investment for the domestic smelting industry. Indonesia had moved from exporting raw ore to exporting processed but still relatively low-grade nickel — a genuine step forward, but still far from controlling the battery manufacturing, technology and branding stages where the real margins sit. European investors pulled out of higher-value refinery investments over environmental and labour concerns, leaving the upward climb incomplete. Moving up one rung of a value chain is not the same as controlling it. Who Owns the Refinery The critical question for any resource-exporting country is not who owns the mine. It is who owns what happens after the mine: the refinery, the factory, the patent, the brand, the logistics network, the financial instruments through which investment flows and profits are repatriated. These are the stages at which the difference between a commodity price and a consumer price gets divided up, and they have been organised, over decades, by companies and financial institutions headquartered overwhelmingly in wealthy countries. UNCTAD’s work on global value chains has consistently shown that developing countries participating in these chains tend to do so at the lower-value stages, and that upgrading moving into higher-value activities requires not just investment but access to technology, intellectual property, skilled labour and market relationships that are themselves concentrated in incumbent players with every incentive to protect their position. Natural resources matter. But the historical evidence is clear that countries do not become prosperous simply by possessing them. Prosperity comes from controlling what happens to those resources as they move from the ground to the consumer and the rules governing who is allowed to do that, and under what conditions, remain one of the most consequential and least discussed dimensions of how the global economy is organised. Subscribe to Our Newsletter Get the latest CounterCurrents updates delivered straight to your inbox. Utkarsh Mishra is a journalist based in Ranchi writing on law, labour rights, and the environment. His work has appeared in Feminism in India, The India Forum, Down to Earth, The Policy Circle, Verdicto News and Zee News.