POLI 227 Lecture Notes - Lecture 5: 1973 Oil Crisis, Comparative Advantage, Bretton Woods System
21 Apr 2020
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Substitution industrialization (isi: manufacturing goods locally instead of import, relying on the manufacturing to stimulate industrialization domestically. Isi and indigenous manufacturing: 1960s-70s: developing countries in latin america and asia developed indigenous industries. Isi also encouraged corruption, lack of competition: mismanagement of finances, overruns, the jobs these created were outweighed by the costs of buying and maintaining machinery, countries started borrowing money, used foreign exchange reserves to buy western goods (machinery) Isi quickly stopped being profitable: countries in debt and unable to pay back, however, some countries that did succeed to industrialization did adopt some of the same principles. Interventionist principles: the state government (not the private sectors) controls and allocates land and natural resources, industries, and asset, states intervene to prevent market failures. Investment in human capital: governments subsidized education, training for workforce. International financial institutions (ifis: founded by the us and europe in 1944, world bank and international monetary fund (also known as bretton- woods institutions)
