Comparative Dependence and Economic Development

The studies of trade, then, can be summarized in the following way: (1) The intensity of trade has no systematic effect on the rate of economic growth. (2) The concentration of a country's exports in just a few commodities have the effect of reducing economic growth. (3) But the concentration of a country's exports in terms of their destination to a few other countries has no effect on the rate of economic growth. (4) The greater the export of raw materials or unprocessed goods, the lower the economic growth of a country. And (5) these effects are conditional on level of development, such that within the poorest stratum of countries, there does not appear to be any systematic effect of commodity concentration or composition but there is a positive effect of intensity. In reviewing these studies, the general conclusion is that it is not the amount of trade that affects economic growth, but the characteristics of form and composition which matter. These studies tend to analyze these effects separately; but it seems clear that a better and more complete analysis would combine all these characteristics, taking account simultaneously of how much of what type of product is traded from what type of country to what type of country. Steiber (1980) presents a design which begins to approach such a complete analysis, but a large amount of this work needs to be done. Further work on trade should shift in this direction. We now turn to the findings of the effects of foreign capital on economic growth.