The Macroeconomics of Successful Development: What Are the Lessons?

Abstract

Recent work on development strategy emphasizes export-based approaches in contrast to industrialization based on domestic markets. This paper explores the evidence for the new paradigm from both cross-sectional and case-study perspectives. The cross-sectional data suggest that high-performing economies have had relatively high rates of growth (although not necessarily high levels) of exports, high rates of investment, and low rates of government expenditure. The success of high-performers cannot be attributed, however, to an easier external climate or aggressive devaluation. A case study of Korean development identifies three factors as particularly important: bold but sound macroeconomic management, innovative export promotion, and an unusually responsive economy. A case study of Turkey's export drive in the 1980s reveals similar policy measures; Turkey's outward-oriented adjustment program reestablished access to commercial credit despite the fact that debt increased relative to GDP. Turkey's borrowing from international financial institutions permitted adjustment without a decline in income; it is a model for the "Baker Plan"-that is, the strategy of accelerating adjustment and growth in debtor countries through the provision of additional international credit to complement and support vigorous domestic adjustment.