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7.docx


Department
Political Science
Course Code
POLB90H3
Professor
R Rice

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State vs. Market-led Development strategies
Import substitution industrialization
Strategy of development based on manufacturing goods domestically that were previously
imported
Govt took control over industrialization by imposing tariffs on foreign goods
This is mean t to boost local production
At the same time they imposed quotas on how much can be imported
That raises the price of imported goods
Tax incentives and low interest loans and subsidies to domestic industries to allow them to have
a market at home
Merit of this approach
Politically popular because it creates a lot of jobs and low prices for domestic goods in the short
term
Improves social and economic indicators
Form of economic independence. It cuts ties with the north. It is supposed to go against
dependency theory
Establishes a manufacturing base that was not there before
Limits of controlled economic model
It loses momentum quickly
Initially very successful and very popular domestically
It creates distortions in the economy
It creates sectoral disparities because not all sectors benefit of subsidies
Some industries did not get any help
Inefficient production
It protects high end industries like airlines
In the end it disappoints industrial employment because it does not protect it that much
Small domestic markets that limit growth
Limited demand in the contry and no export
In the long run industries become heavily dependent on loans
Export oriented industrialization
Tied to exporting stuff
You can produce what you do better and export it
East asia switched to that quickly
Africa and latin America did not
That was they key to their success
They switched to that in the 1950s
Latin America did not
East Asian miracle
The economic take off of south korea, Taiwan, hong kong and Singapore in the 1980s when
much of the global south went into economic decline
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