Export-oriented Industrialization - Importance

Importance

Export-led growth is important for mainly two reasons. The first is that export-led growth can create profit, allowing a country to balance their finances, as well as surpass their debts as long as the facilities and materials for the export exist. The second, much more debatable reason is that increased export growth can trigger greater productivity, thus creating more exports in an upward spiral cycle.

The importance of this concept can be shown in the model below from J.S.L McCombie and A.P. Thirwall's Economic Growth and the Balance-of-Payments Constraint.

yB is the balance of payments constraint, meaning the relationship between expenditures and profits

yA is the actual growth capacity of a country, which can never be more than the current capacity

yC is the current capacity of growth, or how well the country is producing at that moment

(i) yB=yA=yC: balance-of-payments equilibrium and full employments (ii) yB=yAC: balance-of-payments equilibrium and growing unemployment (iii)yBA=yC: increasing balance-of-payments deficit and full employment (iv) yBAC: increasing balance-of-payments deficit and growing unemployment (v) yB>yA=yC: increasing balance-of-payments surplus and full employment (vi) yB>yAC: increasing balance-of-payments surplus and growing unemployment (McCombie 423)


Countries with unemployment and balance-of-payments problems look to export-led growth because of the possibility of moving to either situation (i) or situation (v).

Read more about this topic:  Export-oriented Industrialization

Famous quotes containing the word importance:

    “More than ten million women march to work every morning side by side with the men. Steadily the importance of women is gaining not only in the routine tasks of industry but in executive responsibility. I include also the woman who stays at home as the guardian of the welfare of the family. She is a partner in the job and wages. Women constitute a part of our industrial achievement.”
    —Herbert Hoover (1874–1964)

    “People without imagination are beginning to tire of the importance attached to comfort, to culture, to leisure, to all that destroys imagination. This means that people are not really tired of comfort, culture and leisure, but of the use to which they are put, which is precisely what stops us enjoying them.”
    —Raoul Vaneigem (b. 1934)

    “There is, I think, no point in the philosophy of progressive education which is sounder than its emphasis upon the importance of the participation of the learner in the formation of the purposes which direct his activities in the learning process, just as there is no defect in traditional education greater than its failure to secure the active cooperation of the pupil in construction of the purposes involved in his studying.”
    —John Dewey (1859–1952)