THE WORLD CRISIS AND THE RAW-MATERIAL ORIENTED TRANSITION ECONOMIES

Abstract

The world crisis, which naturally aggravated many problems, increased the raw-material dependence of the transition economies of at least some of the CIS countries. A comparative analysis of the economic progress achieved in the last decades revealed that natural riches slow down economic growth.1 This phenomenon, known as the resource curse, was accepted as a fact and became a subject of eco-nomic studies, especially after J.D. Sachs and A.M. Warner2 published their articles dealing with the negative statistical dependence between natural riches and economic growth rates.

The authors, who looked at the “natural re-sources curse” as a factor of investments, corruption, the country’s openness, and trade conditions, agreed that natural riches should be described as a negative factor.
There are numerous examples confirming the above: between 1965 and 1988 the per capita GNP of the resource-dependent countries dwindled by approximately 1.3 percent every year, while in the countries with low and average in-comes it grew annually by 2.2 percent.3
Nigeria, the oil-related income of which increased between 1965 and 2000 from $33 to$245 per capita in comparable prices while the GDP remained the same ($325 in comparable prices), is one of the most striking examples among the OPEC countries.
Between 1970 and 2000, the share of the poor (with incomes below $1 per day) in the country’s population increased from 36 to 70 per-cent.4

Many countries have been able to disentangle themselves from the natural resource curse and are demonstrating adequate development rates. Such are the United States and Botswana, among others. The opinions about the fairly contradictory empirical regularities of the “natural resource curse” differ. Theoreticians rely on an analysis of all sorts of economic and institutional aspects of what is known as Dutch disease (economic re-structuring) caused by a country obtaining additional profits.

In fact, Dutch disease (Dutch syndrome) is a wider concept than the “natural resource curse "since the money might not only come from the raw-materials sector or market fluctuations but also in the form of foreign aid.

Much has been written about Dutch dis-ease.5 Most authors explain it by the contracting production of finished industrial goods responsible for external benefits. Others attach special importance to rent, economic policy mechanisms,and exchange rate fluctuations.

 V. Matveenko,6 who has relied on the one-sector model to analyze the correlation between raw-material dependence and economic growth rates, and K. Kuralbaeva and O. Eysmont,7 who studied the dependence between the GDP growth rates of a re-source exporter and the share of the resource sector in the economy using the two- and three-sector model, stand apart among the CIS authors.

The majority prefers simpler explanations: World oil and other raw material prices are never stable—the alternating booms and declines are fairly short. The volatility of the raw material markets is the main curse of raw-material exporters.

Everything that has been written today can be divided into two groups. One of them looks at the short-term consequences of the raw-material curse, the other at its long-term repercussions.

The transfer from a planned to a market economy has its specifics, and the symptoms of Dutch disease betray themselves gradually. This is why an adequate analysis is very hard to achieve.

Even before the crisis, CIS analysts spent much time talking about the resource curse and whether their countries were affected by it. To-day the time has come to look at the roots of the countries’ raw-material dependence in order to grasp the meaning of what is going on and address the short- and long-term tasks.