Beyond export-led growth

Abstract

In light of the adverse conditions in the current international economic environment this paper reassesses the feasibility of continuing to rely on manufacturing export-led growth as the major development dynamic for most LDCs during the next decade. This paper argues that after the initial stages of industrial development, the emphasis in policy toward agriculture should shift from surplus extraction to surplus creation and to the generation of demand linkages with the rest of the economy. The author compares the relative merits of two alternative open development strategies — export-led industrialization and agricultural-demand-led industrialization (ADLI) — by means of several simulation experiments. The experiments are performed with a computable general equilibrium model of a small, low-income, semi-industrial, open economy which is a stylization of South Korea of 1963. They are carried out in an international environment assumed to represent the next decade based on a rate of growth of international demand for imports of about half the 1960–1973 rate. The results support the ADLI approach on all counts.