the Dutch evade the “resource trap”

Last week, I participated in a conference on the “ethical aspects of ultrafast communication.” It was funded by the Netherlands government as part of a massive technological program. Apparently, most of the Internet is now carried on fiber-optic cables that were laid during the dot-com bubble of the 90s. But the signals have to be switched, stored, and buffered using traditional circuits–with electrons rather than light waves. These switches and other components are slower than fiber-optic cables by several orders of magnitude. The Dutch are now optimistic that they can build “all-light” components that will increase the speed of the Internet by at least 100-fold, thereby expanding opportunities for voice, video, and interactivity.

The money that they are investing in this research comes from giant natural gas deposits that were discovered around Groningen in 1959. I asked whether the financial returns of the “ultrafast communications project” will go to the Dutch government, universities, specific companies, or to no one at all (if the inventions are put straight into the public domain). No one at the conference was sure. Nevertheless, the investment sounds smart to me.

There is an interesting contrast with countries like Nigeria, Venezuela, and Iraq, which seem to be much worse off because they have vast deposits of valuable raw materials than they would be otherwise. Countries fall into a “resource trap” when their governments can capture the revenue from raw materials and buy popularity with targeted social programs, while also maintaining advanced police states. The extraction of raw materials does not create many jobs or allow workers to form large unions, but it does bolster the state. Since good government is the key to economic growth, and natural resources often support bad governments, they can be a curse. But not in countries like the Netherlands, Norway, and Iceland, where excellent democratic government and an engaged citizery predated the discovery of oil or gas. In those cases, free resources are–as you might expect–a good thing.