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What are the differences between an outward-oriented growth strategy and an inward-oriented growth strategy?

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An outward-oriented growth strategy is one that is oriented towards export and trade, and an inward-oriented growth strategy involves selling to consumers in one's own country and focusing on economic development.

While both strategies can be successful, most countries need to combine the two. An outward-oriented strategy for undeveloped countries can result in their simply being exploited for natural resources by wealthier countries and trapped into dependency. Often, corrupt elites benefit most from exports of raw materials such as ores and oil. Higher up the development ladder, though, countries such as Germany and Japan have had great success with high-value exports. Even in such cases, though, this does leave a country dependent on other countries and exposes it to political risks.

Countries with large internal markets such as the United States can fuel growth by manufacturing and selling goods to their own consumers. This model allows for inward research and development and strengthens the economy. On the other hand, high-wage countries produce items very expensively and may resort to high tariffs and protectionism to sustain their markets. Also, this can lead to issues with balance of payments, as most countries do need to import some goods, and if imports are not balanced by exports, it can harm the currency.

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Externally oriented growth strategies are commonly found in developing countries. An eternally oriented, or export-led, economy tends to involve a number of high-labor, low technology goods, such as crops or extracted minerals, leaving a country in order to feed and supply more developed nations. These goods are often cheap on the global market, so production must be increased in order to make any significant profit. Over time, this system shifts larger and larger parts of the populous of these countries into work that focuses on the global marketplace rather than on their local livelihoods.

Internally oriented growth strategies, on the other hand, reject these disadvantages and avoid participation in the global marketplace. Many developing countries, in response to low global demand and a failure to export products at competitive prices, turn instead to strategies where they aim to build an internal economic base. This allows for a more diverse internal economy and avoids some of the harms of intensive resource extraction and monocropping.

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When discussing growth strategies for national economies, there are two main ideas. The first of these is an outward oriented strategy. This strategy focuses on expanding the national economy through exports and an emphasis on international business. By increasing exports and international opportunities, the country will increase its incoming cash flow, giving citizens more money to spend and bolstering the economy.

Inward oriented growth strategies focus instead on economic activity within the country. These strategies attempt to bolster the industrial and production sectors to ensure that there are enough goods and products to supply for the citizens of a country. Inward strategies are beneficial for more developing countries that have not yet gotten to the point where they have significant infrastructure for exporting and can’t rely on international business to supply a consistent stream of income for their nation.

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Outward- and inward-oriented growth strategies are two different tactics for developing economic growth within a nation. They are both straightforwardly named. An outward-oriented growth strategy focuses on external growth—developing trade and international business dealing. The country is focused on creating exports and therefore generating income for the nation, which it can use as capital. This is very beneficial for a nation that has developed past the industrial, internal markets it needs to support its citizens.

An inward-oriented growth strategy is exactly the opposite, focusing on internal consumers in the nation. This strategy focuses on domestic production of goods and industrial functions to provide for the needs of the country. For obvious reasons, this does not work well with multinational companies.

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An outward-oriented growth strategy supports free trade, businesses that penetrate different international markets, open communication, employment, and capital flows. The strategy is beneficial to developing countries because it encourages international trade, which plays an important role in their economic growth. For instance, developing countries can export their products to sophisticated markets.

On the other hand, an inward-oriented growth strategy advocates for a culture of learning through practice in industries such as manufacturing. The strategy is characterized by limitations in trade, labor, and communications. Furthermore, it does not support multinational companies. An example of an inward-oriented growth strategy is when a government makes decisions about the market for the purposes of meeting economic objectives. Government intervention can be in the form of policies and regulations.

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The major difference between these two strategies has to do with the attitudes that they hold towards trade.

An outward oriented growth strategy is one that sees trade as the way for a country to develop.  A country relying on such a strategy wants to have free trade (at least for its exports).  It wants to allow goods and services to flow freely around the world.  By contrast, an inward oriented growth strategy is one that would prefer autarky.  Such a strategy will seek to restrict trade so that it can create its own, relatively self-sufficient domestic economy.

In reality, most countries use a combination of these two, trying to push free trade in areas where they export but to restrict it in ways that can protect domestic industries.

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