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  • Print publication year: 2014
  • Online publication date: June 2014

4 - Export-Led Growth

Summary

The growth of exports was a necessary but not sufficient condition for successful export-led growth. Yet, as we saw in Chapter 3, only a small number of countries can be said to have met even this basic condition. The problem was not, in general, a shortage of demand; far more important were the constraints on the expansion of export supply. Countries with fast growth of exports had usually overcome the obstacles to export expansion on the supply side, whereas those with slow growth were unable to break down the often formidable problems that confronted the export sector throughout the nineteenth century.

Export expansion, whether fast or slow, could produce one of three export-led models: additive, destructive, or transformative. In the additive model the export sector was grafted onto the existing structure of production with very little change in the nonexport economy. Resources were attracted into the export sector without reducing output elsewhere, and factor productivity in the nonexport economy was unaffected by the growth of the export sector. An example of additive growth is provided by the expansion of banana exports from Honduras at the start of the twentieth century. The land – previously unutilized – had a zero opportunity cost, the capital was foreign, and the labor was provided in large part by migrant workers from the British West Indies and El Salvador. The impact on the rest of the economy was minor.

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