GOVT 3313 - 0408 State-led Development and the Public Sector Benjamin Smith The Wrong Kind of Crisis Why Oil Booms and Busts Rarely Lead to

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0408 – State-led Development and the Public Sector Benjamin Smith – The Wrong Kind of Crisis: Why Oil Booms and Busts Rarely Lead to Authoritarian Breakdown Democracy is more likely in wealthier countries. Authoritarian regimes are more likely to fall during economic crises. Many authoritarian regimes in the developing world have based their legitimacy on their ability to provide stable economic growth through planned development. Economic crises in developing countries have had a robust destabilizing effect on authoritarian regimes, often producing the conditions under which democratic transitions can take place. The two most prevalent economic effects of oil-induced crisis During booms, when national economies begin to overheat as governments inject windfall revenues beyond the capacity of the economies to absorb them, high levels of inflation ensue. Low or negative growth – oil bust period of the 1980s The boom period is just as politically volatile as the bust period. The prevalence of Dutch disease effects in exporting economies leads a sudden influx of rents to produce non-oil sector stagnation and serious inflation. Even during the bust years when patronage rents shrink radically, or nearly disappear altogether,
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This note was uploaded on 12/17/2009 for the course GOVT 3313 taught by Professor Patel,david during the Spring '08 term at Cornell University (Engineering School).

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GOVT 3313 - 0408 State-led Development and the Public Sector Benjamin Smith The Wrong Kind of Crisis Why Oil Booms and Busts Rarely Lead to

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