points in 2009 compared with 2007 (International Monetary Fund 2009, Ch. 1). Conceptually it was understood that this was a possibility, but going through the experience is driving the lesson home. It is hard to believe that it will not have consequences for development thinking. Emerging-market governments may be able to do nothing to prevent crises in rich countries, but they can take steps to limit their vulnerability to those shocks.

Another issue raised by the crisis – perhaps not a “lesson” yet, since the jury is still out – is the way it may affect export-led growth strategies. In the development strategy arena, one point that has characterized the emerging post-Washington Consensus is a belief that export orientation is beneficial for growth and development. This strategy is sometimes characterized as adopting a “mild bias” toward exports or taking strong positive steps for “export facilitation”, for various reasons. First, it ensures that a country will be more integrated with the global economy, which can accelerate technological advance in the trading country. Second, it can increase the average productivity of the home-country firms, by winnowing out the least productive and providing an opportunity for the most productive to grow more rapidly. Third, if it is adopted in conjunction with reduced protection of domestic markets, this strategy can reduce incentives for rent-seeking. This sort of export orientation has been a central element in the growth strategies of most of the rapid developers of the past half-century.

Might this mild bias toward exports in growth strategy now be questioned, in light of the major external imbalances that helped make the crisis possible? Although it makes little sense to blame the global “saving glut” for bubble psychology and regulatory failures, the quantity of money recycled from export surpluses almost certainly exacerbated those underlying problems. Now, in the wake of the crisis, it is widely expected that the US balance-of-payments deficit will need to fall to more sustainable levels, as the US household saving rate rises from its near-zero rates of recent years. Already, in the first year of the crisis, the shock to global trade has been larger than originally expected. Over the longer term, a fall in net US imports will reduce demand for net exports, crowding the space that potentially export-led growers may be jostling to fill. John Williamson recently argued that “mercantilist models are not sustainable” (Williamson 2009), by which he means that the export-surplus strategy that has characterized some major emerging-market exporters in recent years (especially since the East Asian Financial Crisis) will no longer be viable in this environment. Dani Rodrik puts the dilemma this way in a recent paper: “On the one hand, global macro stability requires that we prevent external imbalances from getting too large. On the other hand, growth in poor nations requires that the world economy be able to absorb a rapid increase in the supply of tradables produced in the developing world” (Rodrik 2009).

An imminent decline in net exports from developing countries would not necessarily require moving away from an export-led growth strategy. If the benefits from that strategy come primarily from the process of exporting, importing, and engaging with the global economy, then a net export surplus may not be necessary. But even so, there is a question of how countries could implement a strategy designed to promote rapid export growth. Export-oriented strategies have historically given a boost to tradeables by keeping the real exchange rate undervalued. Rodrik argues that the 19