Resource Abundance and Economic Development

By R. M. Auty | Go to book overview
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Yet even more extreme closure of the economies of India and China (with exports only 1-2 per cent of GDP) did prevent growth collapses in those countries. This is partly because such extreme closure did reduce the sensitivity of the economy to trade-induced instability. More importantly, the two large Asian economies adjusted to the external shocks by relying far less on foreign borrowing that they might be unable to service (Auty 1994). Even so, both China and India abandoned autarky as its growth-retarding effects became apparent. Interestingly, such reform proved far easier under Deng's developmental autonomous benevolent state in China than under the more resource-abundant and polarized democracy of India, which moved only slowly towards a consensus for reform.

Finally, the large resource-abundant countries do appear to have recovered faster from their growth collapses than small countries (see Table 2.3). This reflects their greater capacity to diversify in response to the new opportunities created by trade liberalization (Auty 1999). However, just how quickly the recovery occurs depends upon the legacy of the industrial structure from infant industry protection, being faster with higher levels of MNC and domestic conglomerate ownership, and also upon the capacity to sustain prudent economic policies. The type of political state conditions the latter: Argentina led Mexico towards consensual democracy during the 1990s, and its economy recovered the fastest.


REFERENCES

Auty, R. M. (1994), Economic Development and Industrial Policy: Korea, Brazil, Mexico, India and China, London: Mansell.

Auty, R. M. (1999), 'Large Resource-Abundant Countries Squander their Size Advantage for Rapid Economic Growth and Reform: Argentina and Mexico', UNU/WIDER Working Papers, Helsinki: UNU/WIDER.

Balassa, B. (1984), 'Adjustment policies in developing countries: a reassessment', World Development, 12, 955-72.

Balassa, B. (1985), 'Adjusting to external shocks: the newly-industrializing developing countries 1974-76 and 1979-81', Weltwirtschaftliches Archiv, 121, 116-41.

Bazdresch, C. and S. Levy (1991), 'Populism and economic policy in Mexico, 1970-82', in R. Dornbusch and S. Edwards (eds.), The Macroeconomics of Populism in Latin America, Chicago Il: University of Chicago Press: 223-62.

Berlinski, J. (1992), 'Trade policies and industrialization', in S. Teitel (ed.), Towards a New Development Strategy for Latin America, Baltimore: IADB/Johns Hopkins University Press: 323-36.

Buffie, E. F. and A. S. Krause (1989), 'Mexico 1956-86: from stabilising development to the debt crisis', in J. D. Sachs (ed.), Developing Country Debt and the World Economy, Chicago, Il: University of Chicago Press: 141-68.

Cardoso, E. and S. Levy (1988), 'Mexico', in R. Dornbusch and F. L. C. H. Helmers (eds.), The Open Economy, New York: Oxford University Press, New York, NY: 348-69.

Chisari, O. O., J. Fanelli and R. Frenkel (1996), 'Argentina: growth resumption, sustainability and environment', World Development, 24, 277-40.

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