In 1999, a company in Israel did what no one thought could be done – it struck natural gas and lots of it. Since then, two of the largest offshore natural gas fields have been found in Israel’s waters, disproving the belief that Moses led the Jews to the only Middle Eastern country to not have petroleum. In 2011, it found what is believed to hold 250 billion barrels of shale oil – an amount that rivals the 260 billion barrels of crude oil in Saudi Arabia. Most economists argue, however, that this is not good news for Israel due to the “resource curse.” The concept claims that finding an abundant amount of natural resources actually harms the local economy, politics and society as a whole through means of abuse of power, manipulation and pure disregard for societal welfare. This usually is applied to small, poor and previously corrupt governments.
Currently, Israel is in a good position to avoid the resource curse. It is a militarily and economically strong, democratic nation. It has many resources available to it as well as lessons from the past to help it avoid the turmoil that historically faces nations with newfound petroleum wealth. This paper argues that not only can Israel beat the resource curse, but that the concept of the resource curse itself is flawed. Through historical examples of Nigeria and Canada, it is proven that not only small and weak governments fall victim to the greed and temptation that follows new resource wealth. The United States and Norway will show that with correct policy response, governments can avoid the curse highlighting the fact that an avoidable “curse” is, in fact, no “curse” at all.
Finally, this paper will outline the appropriate political response for Israel containing several policies that limit sector transfers and exports as well as outlines the establishment of two sovereign wealth funds. Israel, like others before, can avoid the resource curse and boost all parts of its economy by taking several intricate steps
