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Import Substitution Industrialization

12 Pages

Political Science
Course Code
Sophia Moreau

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October 25, 2010 Import Substitution Industrialization Four Strategies of Economic Development o A strategy might be a policy decision by the government or it might just be the way things are o Manufacture-export You build up a strong manufacturing base and then you produce secondary goods through that manufacturing industry, and then they exported those secondary goods (Britains economic strategy) o Forced-capitalization When you have forced savings and very low wages with a goal of building up the reserves of capital to allow for domestic investment in industrialization Its a way of building up a reserve of money through forced savings and low wages You then use that money to invest in industrialization o Primary-product export This is the strategy of economic development that most countries in the global south engaged in up until mid-way through the last century You export primary products either thats an end in itself (primary agricultural goods or resources) or because its a step toward capitalization; you export your primary goods as a way to build up your capital (capital accumulation) and then youre planning a further step to industrialize o Import substitution industrialization Organized and run by the government It involves a lot of state interference in the market A strategy might be something designed as a strategy or it might be ex-post facto you look back on the strategy they used even if it wasnt necessarily a conscious goal You build up the manufacturing base by shutting down imports on manufactured goods The new manufactured center is able to take advantage of the existing market o History of ISI This was a strategy used in particular parts of the world at a particular time The first wave of ISI was generated by WWI; during the war and directly because of the war most developed country economies redeveloped their production to military needs and they stopped exporting manufactured goods Developed countries involved in WWI and involved in supplying other countries for WWI reorient their economies towards war-time production, so they stop producing a lot of the goods that theyve been producing they stop exporting goods to developing countries There are a lot of shortages in the developed world and in the developing world Developing countries responded in one of two ways: either by going without living with a shortage and just not consuming that secondary product anymore, or by making an attempt to produce those goods domestically This happened again in the period of the Great Depression (30s) and it happened again in WWII It happens over and over again By the time decolonization starts (starting with India), there are a lot of leaders who understand the need of developing a manufacturing base so they are not as dependent on production in the developed world ISI is initially forced on developing countries because of changes in production in developed countries o 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 o ISI is the solution to dependency: build up a manufacturing base by withdrawing from the global market o Dependency - some countries are selling cheap agricultural products and theyre forced to buy expensive manufactured products uneven economy o The internal balance of trade in these countries (between imports and exports) cannot be sustained o This is what causes the problem of dependency - what youre importing costs more than what youre exporting o In order to break out of this dependency logic a country can withdraw from the global market o You can withdraw in one of two ways: Stop importing secondary goods and you can stop exporting raw materials o Developing your own domestic manufacturing base o There are two reasons to develop your own domestic manufacturing base:
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