Countering the resource curse: a comparative analysis of political economy for Chile and Australia

• Main Author: Ford, Daniel R.
• Other Authors: Barma, Naazneen H.
• Published: Monterey, California: Naval Postgraduate School 2015
• Online Access: http://hdl.handle.net/10945/45854

Approved for public release; distribution is unlimited === This thesis attempts to explain how advanced economies with large mining sectors, like those of Australia and Chile, have managed to avoid the resource curse. Minerals (iron ore and coal) account for over two-thirds of Australia’s exports, and minerals (copper) amount to over two-thirds of Chilean exports as well. Hence, Australia and Chile have been labeled as commodity-based economies in the past. There is some validity to this claim, as Chile has gained significant fiscal revenues from copper sales, and Australia has experienced a mining boom over the past two decades, coupled with the rise of China. This work examines the relationship that natural resource mining and governance has to the political economy landscape of both countries. Using a historical institutionalist lens, various trends in the political economies of both nations are examined in relation to resource curse factors, such as developmental indicators, mining-specific policy and rents therefrom, and Dutch Disease. This thesis argues that the governments of both countries developed very different means to manage commodity market boom and bust cycles. Specifically, Chile has innovated counter-cyclical fiscal policies and copper funds, while Australia has pursued a more neutral fiscal policy with little intervention into mining by the commonwealth (until recently). The strengths and weaknesses apparent to both governments’ management of their mining sectors is explained and compared against resource curse factors. Forecasting is also presented to include possible ramifications from recent changes to the political economy of both countries in light of large downward swings in commodity prices and a slowdown in China.