Blog can extractive industries promote development?

Position:Travel narrative

I spent the last couple of days at a fascinating workshop at UNU-WIDER on the role of extractive industries in development. Tony Addison, UNU-WIDER Chief Economist-Deputy Director, and Alan Roe, UNU-WIDER Non-Resident Senior Research Fellow and Oxford Policy Management Associate are pulling together a comprehensive new book on the topic, including chapters on just about every aspect of the relationship between extractives industries and development that you can imagine (and several I hadn't).

The book will, no doubt, be launched with great fanfare next year, but I thought it might be of interest to have a sneak peek at some of the ideas emerging from the work so far. Among the many fascinating papers, six ideas caught my imagination.


Caption: Neil McCulloch, Principal Consultant at Oxford Policy Management

Wanted: benevolent dictators (or the near impossibility of 'slow' development)

A leading oil economist reminded us that the natural resource curse (the seeming tendency of countries with significant natural resources to grow slower than other countries) isn't necessarily inevitable. But the list of developing countries that have avoided the curse isn't an encouraging one (common exemplars are Indonesia, Malaysia, Botswana, and Chile). Spot the common factor? While it would be unfair to describe all of these countries as dictatorships (at least not now), a key factor for successful exploitation of natural resources would appear to be the ability to go 'slow' and apply systematic policies of technological capacity-building over an extended period of time. This is an old idea dating from Hirschman, but now popularized again through the New Industrial Policy of Dani Rodrik, Justin Yifu Lin, and Hausmann and Hidalgo. Alas, the only governments with the time for this are ones with, shall we say a 'long-term perspective'. As Manur Olsen argued, it is the 'stationary bandits' that facilitate development, not the 'roving bandit'" whose incentive is to steal as much as possible as quickly as possible. This is bad news because the real politics of many developing countries is of the roving bandit sort. Given that we don't wish to encourage dictatorship, the key question is 'how does the reality of not being able to "go slow" affect the sorts of policies and institutions that should be put in place to manage the extractive sector?'

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