Export-oriented industrialization

However, that may not be true of all domestic markets, as governments may aim to protect specific nascent industries so that they grow and can exploit their future comparative advantage, and in practice, the converse can occur.

[3][4] From the Great Depression to the years after World War II, under-developed and developing countries started to have a hard time economically.

During this time, many foreign markets were closed and the danger of trading and shipping in war-time waters drove many of these countries to look for another solution to development.

However, during the 1950s and 1960s the Asian countries, like Taiwan and South Korea, started focusing their development outward, resulting in an export-led growth strategy.

Some have pointed out that because of the success of the Asian countries, especially Taiwan and South Korea, export-led growth should be considered the best strategy to promote development.

[2] Mainstream economic analysis points out that EOI presupposes that a government contains the relevant market-knowledge enabling it to judge whether or not an industry to be given development subsidies will prove a good investment in the future.

In many LDCs, it is necessary for multinational corporations to provide the foreign direct investment, knowledge, skills and training needed to develop an industry and exploit the future comparative advantage.

This claim has been challenged by a minority of non-mainstream economists, who have instead emphasised the very specific historical, political, and legislative conditions in East Asia that were not present elsewhere, and which allowed for the success of EOI in these nations.

[11] Additionally, some domestic production was explicitly protected from outside competition, for an extensive period of time and until local business entities had become strong enough to compete internationally.

EOI increases market sensitivity to exogenous factors, and is partially responsible for the damage done by the 1997 Asian financial crisis to the economies of countries who used export-oriented industrialization.

[15] The "highly influential" position that "the United States needs higher productivity so that it can compete in today’s global economy", he wrote, is akin to the person supporting it “wearing a flashing neon sign that reads: 'I don't know that I'm talking about'.