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January 2010

Don’t Blame Mother Nature

Otaviano Canuto's picture

by Otaviano Canuto

As my World Bank colleague Milan Brahmbhatt and I observed in a recent note, primary commodity exports remain crucial for most developing countries. When one takes a simple average across developing countries (i.e. attributing each country an equal weight) for 2003-07, commodities still show up as accounting for over 60 percent of merchandise exports, with half of the group featuring a commodity export dependence of over 70 percent. Chart 1 shows different degrees of primary commodity dependence across regions.

Source: Brahmbhatt & Canuto (2010)

Changing Development Paradigms

Raj Nallari's picture

This global crisis in not only about financial market failures but also government failures in several countries as reflected in failure to contain the housing bubbles and credit booms, bad regulations, and lack of supervision and enforcement). Both in advanced and developing countries, there are second thoughts on open markets, private ownership of nationally ‘strategic’ industries (autos, banks), and movement of transnational financial and industrial firms, and migrant labor. Trade and financial protection is on the increase as countries that have been less reliant on exports and foreign capital are weathering the storm better. In this semi-open global environment, would export-led growth strategy be combined with industrial policies to protect domestic industries, and/or emphasize resource-dependent growth, where possible?

Before we respond to these questions, it will be useful to focus on what went wrong in economics in 2007-08. Some economists are re-inventing economics to respond to such a query.