Import Substitution Industrialization

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8 Dec 2010
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Monday October 25th 2010
Import Substitution Industrialization
4 Strategies of Economic Development
-Manufacture- export: (Britain used) build up a strong manufacturer base and then
produced secondary goods, then exported the goods
-Forced- capitalization: (Britain used) when you have forced savings, and very low wages
with a goal of building reserved money, and using that money to invest in industrialization
-Primary- product export: most countries in the global South engaged in up until mid way
through the last century, you export primary products (agricultural goods, or resources you
extract from the ground) because it is a step towards capitalization, or that is your goal
Import substitution industrialization
(Focus of ISI)
-Building up manufacturing enterprises to produce higher-value goods that were formerly
imported; reducing economic focus on primary resources
-Light consumer goods: textiles, processed foodstuffs, metallurgical products
-Heavy industry: iron and steel, heavy chemicals, automobiles
ISI is the solution to dependency: build up a manufacturing base by withdrawing from the
global market
Reasons to implement ISI
-Volatility of primary commodity prices: agricultural prices are always changing
-Declining terms of trade: lower income of elasticity (people who get more rich buy more
secondary products than primary)
-Developing and protecting infant industry: logic of ISI is that you start manufacturing in
areas where you already know there is an internal market but you cut off import so theres
no external competition
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