The theme of this paper concerns how to establish the state as the 'centre of accumulation' as the key element in effecting a transition to socialism in a small, open economy, at the periphery of the world system. While the paper focuses on the case of Nicaragua, the theme is of obvious general relevance since, with the exception of China, post-war attempts at socialist construction in the Third World have taken place almost exclusively in small, trade-dependent economies. By contrast, 'classical' theoretical writings1 on accumulation and growth, influenced by the Soviet industrialisation debate, have usually taken the closed economy as their point of departure, strongly emphasising such issues as the mobilisation of the domestic economic surplus and its transfer between sectors via manipulation of the internal terms of trade, the degree of priority to be given to the capital goods sector, and the choice of technique. Issues such as how to sustain the growth of exports, optimal com mercial policies, balance of payments adjustment etc. have arguably become neoclassical preserves, particularly in the Latin American context, where the phrase 'desarrollo hacia afuera' (outward-orientated growth) has strong conservative political overtones and where, building upon the ECLA tradition, opposition to neoclassical trade theory has found con temporary expression in the dependency and unequal exchange debates. By contrast, the case presented below suggests, albeit in numerical rather than theoretical form,2 the critical importance of the external trade sector, since it is on this, rather than peasant agriculture, that the generation of the surplus for accumulation will primarily depend. The point is not about 'comparative advantage' in the traditional sense; it is rather that the absence of a capital goods sector characteristic of such economies makes foreign exchange, rather than cheap wage-goods, a key constraint. Unless uncertainties about export performance and the scope for limiting imports are carefully considered in setting both the volume and composition of planned investment, growing foreign indebtedness and/or high levels of inflation may weaken critically the state's ability to sustain accumulation. It will be apparent that for the state to act as the 'centre of accumulation', what is needed is far more than simply diverting private savings to the public sector. In general, the state