How to Sustain Growth in a Resource Based Economy? The Main Concepts and their Application to the Russian Case

Background information on resource curse and what has made it so problematic: Dutch disease, vulnerability to external shock, and the risk of developing institutional pathologies. It argues that many of the problems can be overcame by good macro-economic policy. For example, a strong entrepreneurship within a country can help sustain a resource based economy. It can also help diversify the economic structure. The paper use Russia as a case of successful diversification of its economic structure. In recent years economists have come to see rich natural resource endowments as a "curse" or "precious bane" that inevitably undermines development and slows economic growth. Resource-based development undeniably involves important risks. Nonetheless, the resource curse - if it exists - is at least no fatalité, as the examples of Australia, Canada and the Scandinavian countries demonstrate. This paper argues that the serious challenges posed by resource-dependence, which include an increased vulnerability to external shocks, the risk of 'Dutch disease', and the risk of developing specific institutional pathologies, can be overcome, or at least very substantially mitigated, if accompanied by the right economic policies. It then analyses in detail what these "right" economic policies are, and how to set up economic and political framework conditions to facilitate their successful implementation. The paper thereafter looks specifically at Russia as a prominent example of a resource-based economy. It investigates briefly the main drivers of Russian growth in recent years, and makes specific recommendations that would help the Russian economy to sustain high growth.