The Operational Logic of Planning for Industrialization

It is wellknown that real national income of an export-oriented primaryproducing country may be significantly affected by a change in its terms of trade with the rest of the world. The demand for a country's exports is beyond its control; but a central authority may be able to influence its terms of trade by controlling the other blade of the scissor. Through direct and indirect controls over the allocation of domestic investment, the central authority may seek to regulate the domestic production of export goods and also of import substitutes, thereby influencing the supply of exports and hence terms of trade of the country.