Development through Trade

Development was now seen as being promoted through trade. The emphasis shifted from inward-looking to outward-looking policies. Policies that would encourage the growth of exports and discourage imports were considered essential for development.

Switch to Free Trade

To achieve the goal of promoting trade, a sudden and complete switch to free trade was considered essential. The idea was to remove all barriers to trade, including tariffs, quotas, and other restrictions. This would create a level playing field for all players, both domestic and international.

Shock Therapy

The switch to free trade was part of the larger concept of shock therapy. Shock therapy involved a drastic change in the external orientation of these economies. This meant shifting from a closed economy to an open one.

Advantages of Shock Therapy

The advantages of shock therapy included:

1. Increased competition: With the removal of trade barriers, there would be more competition, which would lead to increased efficiency and productivity.

2. Increased exports: With the emphasis on export-oriented growth, there would be an increase in exports, which would generate foreign exchange.

3. Foreign investment: An open economy would attract foreign investment, which would provide the much-needed capital for development.

4. Technology transfer: An open economy would provide access to new technologies, which would help in modernizing the economy.

Conclusion

In conclusion, the switch to free trade was considered essential for promoting development through trade. This was part of the larger concept of shock therapy, which involved a drastic change in the external orientation of these economies. The advantages of shock therapy included increased competition, increased exports, foreign investment, and technology transfer.