case of resource-poor countries into competitive manufacturing that accelerates the accumulation of produced, human and social capital whose efficient deployment sustains rapid and egalitarian economic growth. However, this sequence requires a political state that has sufficient autonomy to sustain a coherent economic policy and the objective of raising social welfare. Although these features are strongly associated with extreme resource deficiency, the relationship between the natural resource endowment and the political state is not wholly deterministic. Nevertheless, the government of a resource-poor country is more likely to align its interests with the majority and to redistribute assets while still maintaining efficiency incentives. Such a state resists pressures to close the economy, which adheres to its emerging comparative advantage.
Although resource-abundant countries may pursue competitive industrialization where they engender a developmental political state, usually a consensual democracy, their progress will initially be slower due to their longer reliance on primary exports and their later and more capital-intensive industrialization, which challenges governance. More often, however, the natural resource rents feed conflicts so that the resource-abundant country has a factional or predatory government that relaxes market discipline in capturing and redistributing the rents. The economy is thereby deflected from its comparative advantage and cumulates economic distortions that retard diversification and/or cause the economy to regress into a staple trap of dependence on a weakening primary sector.
The governments of predatory and factional oligarchic states prefer non-transparent methods for deploying the rents in order to maximize the scope for political manoeuvring. The favoured channels for deploying rents are trade protection, job creation and over-extended public expenditure. Such policies cut economic growth by reducing investment efficiency. It is ironic that the growth collapses of the late-1970s and early-1980s resulted from the backfiring of the resource-abundant countries' efforts to reduce their commodity dependence. Domestic policies to promote infant industry (which resource abundance could sustain for longer than resource-poor countries) weakened their economies through the 1960s. Thereafter, international efforts to reverse the long-run decline in real commodity prices by establishing producer agreements triggered trade shocks in the 1970s that damaged their weakened economies.
The next section of this book, Part IV , draws upon case studies to explore in depth the five resource-abundant development trajectories, starting with the competitive industrialization of Malaysia in Chapter 9 (summarized in column 2 of Table 8.6). Chapters 10 examine growth collapses under different natural resource endowments.
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Auty, R. M. (1994), Economic Development and Industrial Policy: Korea, Brazil, Mexico, India and China, London: Mansell.
Auty, R. M. (1995), 'Industrial policy capture in Taiwan and South Korea', Development Policy Review, 195-217.
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Publication information: Book title: Resource Abundance and Economic Development. Contributors: R. M. Auty - Editor. Publisher: Oxford University Press. Place of publication: Oxford. Publication year: 2001. Page number: 142.
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