The New Terms of Trade Problem: Economic Rents in International Exchange

Abstract

The Post-OPEC petroleum economy permits one to apply Professor Rostow’s leading and lagging sectors approach to growth at the global level. He saw the process of economic change as one of overlapping patterns of sectoral growth, in which some industries led while others lagged.1 When leading sectors moved forward in a group, as during the epoch of British textile and steam power development at the beginning of the nineteenth century, their yields permitted new levels of accumulation. Entrepreneurs were then enabled to acquire financial capital and invest in lagging sectors in response to the opportunities provided by induced demand and technological change. The process of progressive alteration of values by market forces and government policy, generating a succession of sectoral surpluses, was seen by Rostow, in the great Schumpeterian tradition, to be essential to sustained economic growth. This paper examines the effect of recent improvements in the energy terms of trade on the pattern of international economic rents. It raises questions about the role of these changes, including the inducement of energy import-competing sectors, for the development of rich, poor, and middle-income countries.