A fruitful discussion this morning with my Mercatus Center colleague Dan Griswold prompts me to observe that “export-led growth” makes no more or less sense than does, say, “yellow-things-led growth” or “rectangular-things-led growth” or “things-that-grow-in-the-ground-led growth” or “things-the-French-language-names-of-which-start-with-the-letter-‘T’-led growth.”

X-Led Growth Is Not a Thing

Economic growth occurs only when, and only as, there are increases in the amounts and qualities of goods and services available for ordinary people to consume. (Individuals are wealthy the better able they are to consume. If individuals are wealthy the better able they are to toil with as little consumption as possible, then history’s wealthiest individuals would be chattel slaves.)

Yet because in a market economy we generally increase our abilities to consume by producing greater amounts for others to consume – others who, in exchange, give to us what we wish to consume – each of us “grows” economically by producing more stuff (measured in value) for our trading partners to consume, for only then will our trading partners do for us what we ultimately seek from them – namely, give to us more stuff for us to consume.

Some of us produce goods that are exported. If we receive, in return for our exported goods, more goods and services that we value as consumption items – more than we received in exchange for whatever it was that we previously produced –  we are made better off. We “grow” economically. But the same is true for yellow goods. Some of us produce goods that are yellow. If by producing yellow goods we receive in exchange, for our consumption, more goods and services than we received in the past when we produced (say) red goods, we “grow” economically. Ditto for switching our efforts into producing rectangular things.