The name is absent

development — that they suffer from major structural rigidities arising from poorly functioning markets
and institutional deficiencies. Adjustments to changes in market conditions can take many years. This is
especially true of agriculture. Thus, for example, in response to lower-cost imports of foreign food,
peasant farmers growing staple crops for subsistence and sale may be forced to abandon their land and
join the ranks of the underemployed in the cities. Reemployment of the land may have to wait years for
sufficient improvements in the rural infrastructure and institutions — such as the marketing arrangements,
transport, farm-extension services, or the reform of land ownership — before more productive, and
competitive, farming can reemerge. In poor economies with large pools of labor, both land and labor may
thus remain idle for many years. Potential output may be lost and, what is perhaps worse, the erosion in
the structure of rural society may endanger social cohesion.

The criterion of efficiency is also vulnerable to major criticism because it derives from static
equilibrium analysis. It defines efficiency in terms of optimal resource allocation and not in terms of the
long-term rate of growth in output. If efficiency is redefined to include the long term increase in output
resulting from productivity growth and resource accumulation, the policy prescriptions derived from
static analysis may not remain the same. There is unfortunately much less agreement within the
economics profession about the policy prescriptions appropriate for economic growth than for optimum
allocative efficiency, so the issue is debatable. It is certainly quite possible that there are large overlaps in
the policy measures that would improve both static and dynamic efficiency. Economists have pointed to
the effects that measures to improve resource allocation may also have on economic growth — the spur of
greater competition, for instance, or exploitation of economies of scale, or the knowledge spillovers that
come from links with international markets. It seems quite plausible in reality that there may be
substantial fusion of the trade measures affecting both static and dynamic efficiency when trade relations
are being considered among economies that are at similar levels of technological advancement, have well
functioning markets and comparable, supporting market institutions.

But for most developing countries (perhaps leaving aside small countries), whatever the positive
effects of foreign trade and investment on economic growth, it seems unexceptional to assert that the pace

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