World Development Report 1984

Box 3.3 Delinking from the world economy?
Ha.i:r an :pen riding and pajrrncnt4 mor, uil,rahle in p.:.i.:r, -i*ul;till bt .,rpuail, n.:.ne ,n !-r.-' ,. n.r, thiar $15
rq gInr *:n.-ura,: -;u .:.pr,ntp l u:n e -A a', - t'eiaj r tii-an und,r n.Jnre cii r.
tIhe k,ll, r. in i'-'^ ID1 the *ame per. i Irdcl-I
,tl, In-.-,rmrn1 re,--ur-: Thi a , 'n.r..bir. t pcrindt. d& n rilc.pn^ r% i....,ieur n.Ini F.,] ,d
ro-C 0.1-I-'
stronger argument s.-r Irte.-Tatin, inic C.uflhnt. . hich AF,. IUlIfTr Initgr3tu:.r lion to only $4.1 billion. India and Korea
the world economs trr.an rh.ir hich i,r. th, orld C, nom. i. i- unai .,d- were different in several respects:
claims that demand from ;ndu.trial :1'!.. ti mr..-n, c.n.-1uenc:, -.. tr.- e. -, Korea's literacy rate in 1960 was more
countries provides an "-cgir.r of erbatcd tr in:-pprr.riar, -.1.nmilleam p h- than twice that of India; foreign capital
growth" for the developing . 'rid AII cit i. .cr'AIu,d ': h3ng. r3n, Oclot,. to Korea were larger; and, of
countries have to trade to some extent. un-u;rtinub., putl, .p-prndn- i.rt -ni. course, India is a much bigger country
More inward-looking -Mcr. e airc nt icnt. rrI l.nlFrkni poi,cs ill ,-eniutiu,J the with a I,rg-r domestic market, so its
lessbuffetedbyexternal t,h.-,:,. ai. - 1A . ri-run -'r,,.n-,t-: c.:t :pr. '.. itt, exports as a percentage of total GNP
"utward-looking nne' The nmre iaril, 'rd would n,i b .pt rpid to be as high as
:,rd,-Xit. .:.In- .r. .- rh.*I-mhe h,rh r To I.:. ,h,c ;I'jt' ,ht tit .l -ri.,i: k r. :, ih huch they m, :ht well be in
th, pni .Or n n Dap-iral cc*od; in inc,. ni. ht t . ir Ir-in ., .. a.) : ah...:it,.-JUtt rm.
3ri mi he ,,rEar,:r Il-- -:r- u. u.: rid e-.n,--m: -in ik3 . - I.' .r .,ra-r- Nevertheless, there were important
pci I *:. 'n-,-,ns !r,E n.imp-t 1- n;,iarh n-.r.
.,,Zc nc.'rre thin it 1ih l., d.:,r.cn.,r'm '.rnllarTi.:- hr example, in 1960 the
rt..: ni .re Jill,tcuir ^t,.h r. e..n. nil, rl .. t r .- r, r iti,,,irl. Fr r 1 share of manufacturing in GDP was 14
-Fa.ntr .1t.n e 0-- t-'.....: u , th- ntrr,n' 1l -. r' , -i percent in both countries, and the share
mrr.l-lr rhe pr,-p"-r,.r. i.t i-.t . pn,enr h:t', ,rDl, -. 'r., . r, 1. of the labor force in agriculture was 66
r*et,d,I. trria.W-I. F.-r iht,- ra3-.:nr. .h 'I n.Jr. Irt...tm .nra rn.it-'nal .'nr. percent in Korea and 74 percent in India.
3rd.l..ir. t curi.n, u h ; al .n F ., rii,.. I nd i I-, , nrit ar..n., J r nerd ir. Both countries had followed an inwardh
id r, .t , .r, nl, I-.: r zr. o' th but al ;. . cr_,- ih,t t ..i ,n-,.r;,.aI -t . _t.' t- It.. ii looking development strategy in the
rr,t,r-r d3iticulit, in .h , fkrcrni ., ;r:..r rhr- Je,g -thr. 8 it ur -'- For countries with pressure of
nd nv-rd n.ri.-.. Jtebr pr'tleni- th.ur. the I,I- ,t,b-It' E a- t-.L 1t at , tr n- i p.-p.ul3t ....- rn I land and a rapidly grow-
1rW.1r : ut:U. :,rci -1-- .' im, en :r--* Tb.,. ri.- up:inz It, .iar.5 Ir-n-, n n.t t :,tr:nor, ,r, t1,. ing labor force, labor-intensive manufact:.-nr-t
bt .t.- 1. ,r,n Anrrir, urdr x ,rd e-. rr,-.n-rl .urinc rhr -t;rti p.ri,.d turing is a major means for providing
E. ;r i -i.in n,,ddI.,-,rc,.n r . ir, -,jtr ..i' th-a r h rd e,,- rr .. -. ,r . r in:, employment. The relatively poor perforthe
1980s,; rn-utru,: a - i r. ri ii,r rtrl, ri .I Y.,; i, n l-'u i-., mance of Ird... in. i-r.,ni;;n.it manufac-
Ailth he t.* : ,:. rr. ,,hir.- .m it-.-lt *,. . a - n-r.uiCt,rin.- tured -F'-rz meant that employment
an ('it ,a rJ-.rr,t-,li z-trr.,t.ci i *..bi . 3 -cur ' . .i *uari'tr e indi; - n -lr.ii t outside .r, h-:uli,rr ha, rr ..- much less
ousiy dlinin,,h it tr.dc, sit. .- i r.7.nr -. nt...rt rhan r-11 p-r,:nr .- , ind,. , than it could have.
increase or ,-eimnil tiinir,n, -n,,rrui .n-.-, t--- .r.:,n t r-,i C --p-ri,:e i1-r,.
not occur too swiftly, if a large proportion of ing-country trade balances, the amount required to
domestic output is easily tradable-that is, if meet debt service payments, is equivalent to only 5
domestic and international prices are reasonably percent of world exports. Some of the exports of
closely aligned-and if it is easy to expand exports debtor countries, however, face actual or potential
rather than necessary to compress imports. Unfor- restrictions in foreign markets. Equally important,
tunately, many of the principal debtor countries the domestic system of incentives is biased against
got into difficulties just because these conditions exports in many of the developing countries,
did not exist: their exchange rates had become seri- which makes it more difficult for them to exploit
ously overvalued; their producers were heavily the opportunities for exports that do exist.
protected, often by import controls that reduced Partly because of the difficulty of expanding
the incentive to sell abroad; export industries were exports and partly because of this domestic policy
relatively underdeveloped and, in addition, faced bias against exports, imports have been cut dragrowing
restraints in foreign markets. matically instead, with adverse implications for
Because the major debtors account for only a growth. Moreover, there is a difference between
small fraction of world trade, the transfer of reducing imports by reducing domestic spendresources
abroad needed to improve their current ing-painful though that is-and reducing imports
accounts should in theory be accomplished reason- by imposing direct restrictions on imports. The latably
smoothly. A shift of $100 billion in develop- ter is likely not even to produce the needed exter-
44