Resource Abundance and Economic Development

By R. M. Auty | Go to book overview

16 Reforming Resource-Abundant Transition Economies: Kazakhstan and Uzbekistan

RICHARD M. AUTY


16.1 INTRODUCTION

In the mid-1990s, comparative studies of the economies in transition strongly suggested that macro policy determined successful adjustment (de Melo et al. 1996 ; Fischer et al. 1996 ; Aslund et al. 1996). Table 16.1 shows why. It summarizes the performance of the five categories of reformers over the period 1989-94 and suggests that faster reform of macro policy is preferable to gradual reform because faster reformers experience less loss of output and government revenue than slower reformers, and that they resume economic growth sooner.

This approach to transition reform was championed by the international financial institutions and it is termed here the rapid reform model. It rests upon three central premises. First, rapid stabilization and tight inflation control are necessary prerequisites for sustained economic growth. Second, renewed growth also requires prompt realignment of internal and external prices as well as low fiscal deficits. Moreover, price reform calls for privatization and improved financial regulation. Third, and finally, the pace of economic recovery is linked to the comprehensiveness of reform rather than to a recovery in the level of investment.

However, more recent data cast doubt upon the ability of the rapid reform model to explain the differing transition outcomes. For example, the intermediate reformer Kazakhstan has not achieved the economic rebound predicted by the model whereas Uzbekistan, a very slow reformer, has not experienced the accelerating growth collapse that was expected. A key omission from the rapid reform model is the impact of the initial conditions on the transition, notably the natural resource endowment, social capital, and the central planning legacy of economic distortions, especially obsolete produced capital (de Melo et al. 1997 ; Havrylyshyn et al. 1998 ; Kenny 1999).

A principal components analysis (de Melo et al. 1997) of the initial conditions reveals two key parameters for transition performance, namely, the degree of policy distortion and the extent of over-industrialization. These two parameters identify four clusters of transition economies. The two sets of successful reforming countries exhibit

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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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