Resource Abundance and Economic Development

By R. M. Auty | Go to book overview

The instability of the international economy in the 1970s adversely affected most primary product exporters. Yet, cocoa, the main export of Ghana, did well on the world market so that the net effect was to improve the terms of trade. Cocoa functioned as the milch cow for sustaining political support, nurturing development plans and building private fortunes and, as a result, it was continuously discriminated against both directly and indirectly. A major source of growth in total factor productivity results from the reallocation of resources from low- to high-productivity sectors. In the case of Ghana, however, resources were diverted from higher productivity agriculture into industry, which was relatively inefficient. In the process, the potentially beneficial diffuse socioeconomic linkages from peasant farming were degraded into damaging point linkages that benefited a relatively small urban elite.

It took a combination of severe drought and sharply higher foreign debt service in 1982 to finally force change in the political state, in return for assistance from the IMF. Ghana moved hesitantly towards a consensual democracy. Yet, even though some significant strides were made towards economic recovery from the mid-eighties, Ghana was still recording negative genuine savings in 1994 so that its development was still not sustainable. More stringent policies are required to halt the rate of land and environmental degradation, especially in the mining areas, but the critical deficiency appears to lie in social capital. The rectification of this deficiency requires stronger links to tie rural areas into the political and economic decision-making process. It also calls for recognition of the role of the growing bureaucratic-service elite in the democratic process if the threat of violence and social disruption is to be avoided (Mikell 1989).


REFERENCES

Auty, R. M. (1998), 'Resource abundance and economic development: improving the performance of resource-rich countries', Research for Action 44, Helsinki: UNU/WIDER.

Collier, P. and J. W. Gunning (1999), 'Explaining African economic performance', Journal of Economic Literature, 37, 64-111.

Edwards, S. (1997), 'Openness, productivity and growth: what do we really know?' Paper presented at the CREDIT session of the Royal Economic Society Meeting in March 1997.

Frimpong-Ansah, J. H. (1991), The Vampire State in Africa: The Political Economy of Decline in Ghana, Trenton, African World Press.

Gelb, A., J. B. Knight and R. H. Sabot (1991), 'Public sector employment, rent seeking and economic growth', The Economic Journal, 101, 1186-99.

Killick, T. (1978), Development Economics in Action: A Study of Economic Policies in Ghana, London: Heinemann.

Killick, T. (1999), 'Fragile still? The structure of Ghana's economy, 1960-94', in E. Aryeetey, J. Harrigan and M. Nissanke (eds.), Economic Reforms in Ghana: The Reality and Mirage, London: James Currey: 51-67.

Krueger, A. O. (1993), The Political Economy of Agricultural Pricing Policy: A Synthesis of the Political Economy in Developing Countries, Baltimore MD: Johns Hopkins University Press.

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Resource Abundance and Economic Development
Table of contents

Table of contents

  • Unu World Institute for Development Economics Research (Unu/Wider) ii
  • Resource Abundance and Economic Development iii
  • Foreword v
  • Acknowledgements vii
  • Contents ix
  • List of Tables xi
  • List of Figures xiv
  • List of Contributors xv
  • Part I Introduction 2
  • 1: Introduction and Overview 3
  • References 15
  • Part II Critical Parameters in Resource-Based Development Models 18
  • 3: The Sustainability of Extractive Economies 36
  • Appendix 3.1 Deriving Net Income and Genuine Saving 46
  • References 55
  • References 73
  • Part III Long-Term Perspective On, and Models Of, Resource-Based Growth 94
  • References 109
  • 7: Short-Run Models of Contrasting Natural Resource Endowments 113
  • References 124
  • References 142
  • Part IV Development Trajectories of Resource-Abundant Countries 145
  • 9: Competitive Industrialization with Natural Resource Abundance 147
  • References 163
  • 10: A Growth Collapse with Diffuse Resources 165
  • References 177
  • References 191
  • 12: A Growth Collapse with High Rent Point Resources 193
  • References 206
  • 13: Large Resource-Abundant Countries Squander Their Size Advantage 208
  • References 220
  • Part V Lessons for Policy Reform 223
  • References 237
  • 15: Growth, Capital Accumulation, and Economic Reform in South Africa 239
  • Appendix 15.1 257
  • References 258
  • 16: Reforming Resource-Abundant Transition Economies 260
  • References 275
  • References 294
  • 18: A Nordic Perspective on Natural Resource Abundance 296
  • Part VI Conclusions 314
  • 19: Conclusions 315
  • References 327
  • Index 329
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