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A Post Keynesian Perspective on Twenty-First Century Economic Problems

Edited by Paul Davidson

This book explores key economic problems and new policies for the global economy of the 21st century. The contributors discuss to what extent past policy errors were due to the incompetence of policymakers, and highlight problems including: international payments imbalances and currency crises, volatile security markets, inflation, achieving full employment, income distribution and alleviating individuals and nations of poverty.
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Chapter 4: The balance of paymentsconstrained growth model and the limits to export-led growth

Robert A. Blecker


Robert A. Blecker* INTRODUCTION Popular critiques of globalization often claim that the promotion of an export-led growth strategy for large numbers of developing countries rests upon a ‘fallacy of composition’. A few countries, such as the original Asian ‘Four Tigers’ (South Korea, Taiwan, Hong Kong and Singapore), could succeed at export-led growth while they were the only countries adopting this strategy, according to the critique. However, the efforts of other countries to emulate this strategy are bound to foster chronic problems of overinvestment and oversupply, resulting in disappointing growth for the developing world as a whole even if some individual countries succeed at the expense of others. For example, Greider (1997) argues that the ‘manic logic of global capitalism’ will inevitably lead to a global glut of manufactured commodities, as nations that are competing for the same export markets install surplus capacity relative to international demand – a problem that is only exacerbated by the depressed level of wages and the resulting constriction of consumption in the export-oriented developing countries themselves. Remarkably little attention has been given to this fallacy-of-composition argument in the academic literature on trade and development. Most scholars of trade and growth tend to ignore demand-side constraints on exportled growth altogether, including both neoclassical and structuralist development economists. Of those who explicitly discuss such constraints, most tend to dismiss them as unlikely to be important in practice. Only a handful of previous studies have taken the fallacy-of-composition argument seriously, and a few of them have concluded that...

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