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Lecture 9

POLSCI 1G06 Lecture Notes - Lecture 9: Andre Gunder Frank, Import Substitution Industrialization, Root Mean Square

Political Science
Course Code
Todd Alway

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Nov 12, 2015!
1950-60's newly independent states focused on development and export of raw materials!
if these countries continued to sell of natural resources their wealth would not increase - raw
materials only so valuable in relation to the finished product!
what contributes to inequality in the world?!
international economic structure!
multinational corporations!
international institutions!
dependency theory - trading relationship is one that stiens wealth from one area of the world
to another area of the world!
dependency theorist Andre Gunder Frank - have to clear about what we mean by development!
wealth accumulation doesn't necessarily mean development!
satellite development v. sustainable development!
example: north east brazil!
export of lumber easy to build up wealth!
ran out of trees, began to export sugar!
competition with other sugar exporting nations!
began exporting rubber, substitution of synthetic rubber began to devalue rubber!
began to export coee, but again competition lead to a drop in prices!
therefore not sustainable model for wealth!
solution: satellites much break ties to world capitalist system and go on their own!
example: brazil created a solitary economy during the world wars!
after world wars chains to global economy is re-established; multinational
corporations began to buy local firms and used the developing nations to make
cheaper goods for higher profit!
for dependency theorists - as long as developing nations are connected to the world economy
they will continue to be exploited and used to create final product - the cheapest step in
production (as compared to financing, research and development, robotics)!
Policies to correct exploitation!
%1. Import Substitution Industrialization as a developmental policy!
goods that used to be manufactured abroad will be created at home!
easiest way to isolate from the world economy - is to create a tari wall (a trade tax)!
to make imported industrialized goods much more expensive than they used to
raised the cost of imports above the cost of domestically produced products!
policy followed extensively in 50's 60's in asia, latin america, south america ex.
worked very well, until it stopped working!
first process worked well - initially!
the market for the items is non-substitutable (people need clothes. period.)!
non-durable goods are labour intensive (creating new jobs, new employees,
large domestic market already exists for these items !
this matters because of economies of scale: the more you produce the
cheaper it is to produce each unit. !
the problem came in the second stage!
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