Chapter 10: Dilemmas of Development


Export-Led Growth
ELG is a market-accepting strategy that argues international economic linkages are good because the international economy provides important opportunities for development such as access to managerial expertise, labor, capital, and technology. This strategy entails switching preference for government credit and foreign currency from firms producing for local markets to firms producing for export markets.


While your economy is already largely regulated, you have chosen to protect your national champion firms that export to global markets with preferential access to credit and foreign currency. These firms will likely survive and not be run out of business by international competition.

Next, you must determine your stance on international finance. There are two types of international flows of capital: private and official. Foreign capital can be an important tool for development, but international financial flows all have their drawbacks, as well. Which path of international financial flows will you choose?

What do you do now?

Private Financial FlowsThese are financial flows that originate with non-governmental entities, such as individuals, charities, and private firms. In decreasing order of magnitude, there are four private financial flows: foreign direct investment, international bank loans, international portfolio investments, and international bonds.
Official Financial FlowsOfficial financial flows originate with government entities, including individual governments and inter-governmental organizations. There are two basic kinds of official financial flows to developing countries: official development assistance (ODA) and multilateral organizations' loans. This approach would require you to join the World Bank, Asian Development Bank, and International Monetary Fund.
All International Financial FlowsKashmir would open up to both private and official financial flows.
No International Financial FlowsKashmir would remain closed to foreign capital flows.