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Import Substitution Industrialization

Political Science
Course Code
Sophia Moreau

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4 strategies of economic development
!Something that specifically is identified by a government of country,
or it might just be what happens in the country. Either by design or
manufacture export: export secondary goods, Britain. First build up
manufacture goods then export.
Forced-capitalization: forced savings and very low wages, building
up capital. Reserve of money and then you use it to invest in
industrialization. Early stages of IR.
Primary-product export: economic development that most in the
global south engaged in. export primary products. Either end, or using
it to industrialize later
ISI (orchestrated by government): build up manufacturing base,
shutting down imports. Produce what was formerly imported.
-Not still primarily used.
First wave generated by WW1. Most developed countries put money
towards troops. Stopped exporting to developing countries.
Developing countries either went without, or attempted to make goods
Happened again 1930s, depression.
And WW2.
Decolonization 1948
Initially forced on developing country
Dependency theory starting to gain following 1959 and 60s.
Proposes that it is a solution. Build up manufacture base.
Condition of dependency caused by unequal terms of trade.
Balance between imports and exports cannot be sustained.
Imports expensive, exports not making so much money.

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A country can withdraw from global market as a solution.
Stop imports and exports.
Withdraw in two ways, stop importing secondary goods and stop
exporting raw materials.
ISI neat solution two both of these ways.
Developing own domestic manufacturing base.
Two reason to do this:
1. stop importing because you can now produce them yourself
2. become an exporter of manufactured goods, you could be an
exporter of textiles, secondary good.
Twin functions of getting you out of the global market
You will then look like a core country.
What are the reasons to implement ISI?
-volatility of primary commodity prices
-agricultural volatile, forces beyond control, over production in other
developing countries, changes of preferences, weather, tariffs and
-declining terms of trade, poor countries experience long-term
problem. Primary goods decreased 40 percent last 30 years. Lower
income elasticity. Richer, by more clothes houses etc. dont really buy
more food.
-more efficient to produce food, cost goes down.
-safe way of developing and protecting infant industry
-you start manufacturing where you already know there is an internal
market, capture market.
Britain never had competition, they could charge how much they
wanted to.
When you start industrializing it is going to be inefficient. Wont be able
to compete in world market until you make it better.
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