There are three facts that are crucial to understanding the ongoing debate on development strategies and on economic policy in developing countries. The first is that growth is the most important economic policy goal to these countries. It is true that it would be hard to find someone involved in economic policy-making or politics who would deny or ignore that development is a complex process that entails much more than mere increasing per capita GDP, and, consequently, that the results of a specific economic program should be assessed on the basis of an ample set of indicators including variables related to, say, income distribution and the environment. In practice, however, it is growth that is privileged as the measure of economic attainment. One important reason for privileging growth as an indicator of development is that there is a firm consensus among politicians, public opinion, advisors from multilateral agencies and policy makers that it is much easier to undertake the difficult and often painful economic and social changes required to ensure development in a context of sustained growth. Two necessary conditions for sustainable growth are the steady increase of overall productivity and macroeconomic stability. Hence, the preeminence given to growth naturally implies that policies for productivity enhancement and for preserving macroeconomic equilibrium take priority on the economic policy agenda.

The second fact is closely associated with the previous one. If growth is the measure of attainment, how do we know whether a given rate of growth is high or low? In other words, what is an acceptable rate of growth? For a developing country, 'development' means, in the first place, approaching the per capita GDP of industrialized countries and, hence, developmental success means reducing the income gap between the country under consideration and the wealthier ones. In this way, achieving a rate of growth in overall productivity which is higher than the average rate observed in the developed world becomes a key target for economic policy. Under these circumstances, Krugman's (1996) reasoning that the increase in national productivity is what matters to the improvement of the standard of living independently of what is happening with the productivity of the rest of the world may be correct at first sight, but is politically vacuous. The common consensus is that a sound development policy should set the country on a growth path which would help it to catch up with the industrialized economies. To be sure, the primary reason for using the industrialized countries' income as a benchmark is neither the search for national prestige nor the belief that international economic competition across countries resembles competition across firms, but, rather, the need to fix a standard to assess how well a country is doing. It seems only natural to set such a standard at the highest level of welfare observed at a specific moment.

The third fact is that, at present, integration in the global economy is conceived of as central to fueling productivity and fostering growth (Sachs and Warner 1997). One important reason that accounts for the perception of the international economy as a window of opportunity is the increasing interaction in recent decades between domestic economies and the world economy. The most important indicators of this 'globalization' process are the growing share of international trade in world output and an extraordinary rise in capital mobility, including foreign direct investment. In such a context, it is believed that developing countries could enlarge the size of their export markets and use the proceeds coming from higher exports to foster productivity gains via the acquisition of investment goods abroad and improvements in the quality and variety of imported intermediate inputs used in production. The international capital market is also viewed as a potential source of productivity enhancement. Specifically, it is assumed that a greater supply of foreign direct investment means both greater availability of savings and technology, while accessing international capital markets implies accessing not only more foreign savings but also better alternatives for the diversification of national risks. The most important piece of evidence flagged in the literature favoring these ideas is the experience of the Asian Tigers. Many studies have concluded that countries that have expanded most successfully in the postwar period heavily relied on external trade - or at least on an export-oriented strategy - as a source of dynamism for the domestic economy. An additional piece of evidence is that many countries which did not privilege external trade in their development strategy have faced enormous problems not only to sustain growth but also to maintain a reasonable level of macroeconomic stability. Latin American countries usually serve as a paradigm of the problems that the lack of 'outward orientation' can create. It was suggested that the domestic-market-oriented development strategy these countries followed in the postwar period led to the misallocation of investment and recurrent balance-of-payments crises, which were specially marked in the 1980s during the 'debt crisis'.