Foreign trade and economic growth South Africa during the inter-war years

Abstract

Abstract The role of foreign trade in economic growth has been the subject of considerable debate amongst economists and economic historians.1 The classical school which dominated British economic thinking for most of the nineteenth century accounted for foreign trade by the principle of comparative advantage. If one country was more efficient than another in producing both of two products, it still paid for each country to specialise in the production of that product in which it enjoyed the greater relative advantage and then engage in international trade.2 Despite the seductive appeal of the classical view, the question which it ignored is whether comparative advantage explains how foreign trade is related to economic growth. After all, economists have yet to reach agreement as to how to measure the gains from foreign trade; and even if it is assumed that such gains can be measured, J.D. Gould has insisted that they would account for no more than “…a modest fraction of the economic growth achieved over ...