Some of the world’s poorest countries have tried to achieve more rapid economic growth’ by pursuing inward-oriented policies. These policies attempt to increase productivity and living standards within the country by avoiding traction with the rest of the world. Domestic firms, claiming they-need protection of foreign competition to thrive and grow, often support this infant-industry argument. Together with a general distrust of foreigners, it has at times led policymakers ‘in less developed countries to impose tariffs
another trade restrictions. Most today believe that p~or countries are better off pursuing outward-oriented policies that into grate these countries into the world.economy, ‘When we -studied international trade earlier in this book, we showed how trade can improve the economic well-being of a country’s citizens, Trade is, in some ways, a type of technology. When’ a country exports wheat and important steel, the country benefits as if it Untenanted a technology for turning wheat into’ steel. A country that eliminates trade restrictions will, therefore, experience the same kind of economic growth that would occur after a major technological advance The adverse impact of inward orientation becomes clear .when one considers the size of many less developed economies. The total GDP of Argentina, for, instance, is about that of Philadelphia. Imagine was would happen it the Philadelphia city council were the prohibit city residents from trading with people living ‘Outside -the city limits. Without being ‘able to take advantage of the gains from trade, Philadelphia would need to all the goods it consumes It would also have to produce all its, own capital goods rather than importing of the art equipment other cities Living stands in Philadelphia would fall’ immediately, and the, problem would likely only get worse over time. This is precisely what happened pursued in) oriented policies throughout much of the 20th century: By contrast foundries that pursed outward-oriented policies, such ~as South Korea, Singapore, and Taiwan, enjoyed high rates of economic growth The amount the nation trades with others is determined not only by government policy but also by Countries will good nature seaports fwd trade easier the countries without this resource. It is not a coincidence that many of the world’s major cities, such as New York, San Francisco: and Hong Kong, are located next to oceans. Similarly, because landlocked countries find international trade more difficult, they tend to have lower levels of income than countries with easy access to the world’s waterways. Many African countries, for example, are landlocked, and some economists point to this fact as one reason the continent is so poor.