Publication: Natural Resources and Development Strategy after the Crisis
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2010-02
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2012-08-13
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Brahmbhatt, Milan
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Abstract
In this note the authors briefly review four questions: how dependent are developing countries on primary commodity exports? What is the outlook for primary commodity prices? Is there a natural resource "curse" (or blessing)? What policies can help poor countries best manage commodity resources for long-run development?
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“Brahmbhatt, Milan; Canuto, Otaviano. 2010. Natural Resources and Development Strategy after the Crisis. Economic Premise; No. 1. © World Bank. http://hdl.handle.net/10986/10212 License: CC BY 3.0 IGO.”
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Publication Natural Resources and Development Strategy after the Crisis(World Bank, Washington, DC, 2010-01)Recent events have rekindled interest in the role of primary commodities in development. Was the boom in commodity prices from around 2003 through 2008 just a cyclical event, or does it suggests that prices have entered on a period of secular strength, driven by factors such as demand in big, fast growing developing countries like China? It is notable that, while commodity prices fell sharply from their peak in 2008 with the onset of the global recession, they generally remained much higher than previous recession lows, often as high as in 2005-07, a period of robust world growth. Furthermore, prices have also rebounded smartly over the course of 2009. If a period of sustained commodity strength is imminent, what are the implications for development policies? Development economists have long debated the problems associated with the traditionally high specialization in production and export of primary commodities of most developing countries. Many argue that dependence on primary commodities has proved to be a poisoned chalice or curse for development, which, given this view, necessarily entails structural change and rapid industrialization. Others, however, suggest that sustained high commodity prices could reduce the relevance of an industrialization-focused development strategy for commodity-dependent, low-income countries (LICs). In this note authors briefly review four questions: how dependent are developing countries on primary commodity exports? What is the outlook for primary commodity prices? Is there a natural resource "curse" (or blessing)? What policies can help poor countries best manage commodity resources for long-run development?Publication Dealing with Dutch Disease(World Bank, Washington, DC, 2010-06)This note looks at so-called Dutch disease, a phenomenon reflecting changes in the structure of production in the wake of a favorable shock (such as a large natural resource discovery, a rise in the international price of an exportable commodity, or the presence of sustained aid or capital inflows). Where the natural resources discovered are oil or minerals, a contraction or stagnation of manufacturing and agriculture could accompany the positive effects of the shock, according to the theory. The note considers channels through which such natural resource wealth can affect the economy. It also focuses on the development implications of Dutch disease, particularly the potential negative effects related to productivity dynamics and volatility; and concludes with a summary of possible policy responses, including the mix of fiscal, exchange rate, and structural reform policies.Publication Fiscal Policy for Growth and Development(World Bank, Washington, DC, 2012-10)The global economic crisis that broke out in 2008 has reawakened interest in fiscal policy. In the early stages of the crisis, there was a widespread turn to countercyclical fiscal stimulus. Furthermore, the recent euro area crisis has underlined the importance of long-term fiscal sustainability for macroeconomic stability. More subtly, the global crisis has also refocused interest in fiscal policy as an instrument for longer-term growth and development. In the potential 'new normal' of continued sluggishness in the advanced world, developing countries have strong incentives to seek out new domestic engines for efficiency and productivity growth, as well as for greater equity in development. The potential of fiscal policy to promote these ends is therefore of great interest to developing country policy makers. This note focuses on that potential and provides an overview of how fiscal positions in developing countries have evolved in the wake of the crisis, as well as some emerging policy lessons. It then sketches a conceptual framework for thinking about the connections between fiscal policy and longer-term growth and development. Finally, this note highlights some findings about the connections between fiscal policy and development.Publication Currency Wars Yesterday and Today(World Bank, Washington, DC, 2010-12)An energetic debate on the danger of a global currency war has flared up in recent months, stoked by a renewed move to 'quantitative easing' in the United States, resurgent capital flows to developing countries and strong upward pressure on emerging market currencies. This economic premise views some of the arguments and concludes that the current United States monetary easing is a useful insurance policy against the risk of global deflation. But it is increasing pressure on developing countries to move toward greater monetary policy autonomy and exchange rate flexibility, as well as to undertake the institutional and structural policies needed to underpin such flexibility. Such reforms will take time.Publication Toward a Switchover of Locomotives in the Global Economy(World Bank, Washington, DC, 2010-09)The recovery in advanced economies is now exhibiting several signs of fragility and the medium-term growth prospects for these economies also look difficult. Could developing economies 'switch over' to become locomotives in the global economy, providing a countervailing force against downward trends? The view taken here says, yes, as long as appropriate domestic policies and reforms are pursued in developing countries.
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