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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-2451.2009.00704.x Byline: Richard M. Auty (1) Abstract: Autocracies tend to be more successful than democracies in deploying natural resource rent. This renders democratic Botswana's success an anomaly, which Collier and Hoeffler (2006) attribute to strong checks and balances. This chapter assesses this thesis by comparing rent deployment since the 1960s in democratic Botswana with that in democratic Venezuela and in Indonesia's autocracy under Suharto. It draws on Rent-cycling theory, which posits that the higher the ratio of rent/GDP the more likely it is that the political state will pursue rent distribution at the expense of wealth creation; so that rent is cycled through patronage channels at the expense of markets; and, consequently, the economy is distorted. This increases its vulnerability to external shocks and a collapse in growth. The chapter reaches four conclusions. First, a critical determinant of Rent-cycling outcomes is the strength of the incentives for the elite to prioritise wealth creation over rent distribution. Low rent confers such incentives, as do a rent stream that is precarious (Botswana) and a perception of rent exhaustion (Indonesia). Second, effective institutions reflect rather than mould them wealth-creating incentives. Patronage-driven rent cycling tends to corrode institutions, whereas market-channelled rent tends to consolidate them. Third, few governments manage to pursue all four key policies required for effective rent cycling. Finally, Rent-cycling impacts are cumulative and negative circles are difficult to arrest. Author Affiliation: (1)Lancaster University

All six large newly industrializing countries (NICs) in this study favored an autarkic industrial policy (AIP) in the 1950s. AIP required, however, the rapid build-up of heavy and chemical industry (HCI) which caused foreign exchange shortages if the HCI matured slowly. This is because the import and subsidy demands of the growing protected HCI sector became too burdensome for the competitive primary sector whose rents shrank in relative importance as the economic structure evolved. The two least well-endowed NICs abandoned AIP early in favor of a competitive industrial policy (CIP) which relied on labor-intensive exports to earn foreign exchange and resulted in rapid economic growth. In contrast, the resource bonus of the four best endowed NICs sustained AIP longer, but the longer AIP lasted the harder it became to reform and the slow-maturing HCI sector adversely affected economic growth. In this way the resource bonus became a curse rather than a blessing.

The utility of intercountry comparison in understanding responses to global economic change is illustrated with reference to the oil exporters, the most important class of mineral economy. The analysis is set within a resource-based classification of developing countries. Key Words: country typology, development, intercountry comparison, third world.