Observations on Export-Led Growth
as a Development Strategy
James P. Houck
A striking theme in much recent literature on economic development in the Third World is that export-promoting policies are now viewed as the touchstone of growth (Krueger, 1988; Valdés and Siamwalla, 1988). Chapter 3 by Valdés clearly summarizes this position and emphasizes the role of agriculture and agricultural trade. The core of the chapter is an empiricial analysis of the performance and structure of agricultural exports in recent years. Valdés also elaborates on the evolution away from the negative ideas about foreign trade, the anti-agricultural export bias, that dominated previous development thinking and policy. Elsewhere in the literature such policies may be termed import-substitution strategies. To be considered here is the question of export-led growth from a general perspective. What is export-led growth as an economic policy, and how is it pursued?
Export-led growth is a term that is most often applied to macroeconomic development policy in nations having a large existing export sector or substantial potential for production of exports. In the Third World this potential is most often, but not exclusively, agricultural. The fundamental idea is to set forces in motion that will expand the excess supply of exportable goods, thereby leading to a rapid expansion of output, employment, and earnings in the export sectors. Enhanced activity in these sectors then will spill over into the input and capital markets linked to the tradable goods and then to the economy generally (Krueger, 1980).