[[The Import Substitution Industrialisation n Economic Growth in Latin America

Question 1

Notes

Answer 1

Clearly need to continue VLE

Question 2

What is the import substitution industrialisation (ISI) strategy?

Answer 2

A domestic manufacturing sector established based on a perceived need to shift comparative advantage to manufacturing

Question 3

Why was the ISI strategy adopted by Latin America?

Answer 3

1950s: Raúl Prebisch (exec director of ECLA) thought primary product exporting countries during war suffer from adverse trade movement
Policy recommendation: establish domestic manufacturing sector to shift comparative advantage to manufacturing

Question 4

First phase of ISI strategy

Answer 4

1870-1913 (Belle Époque)
Focus: exporting primary products

Question 5

Second phase of ISI strategy

Answer 5

Post Second World War
Focus: ISI
ISI generally judged to have failed Latin America bc created market distortions and uncompetitive industries

Question 6

What are the long-run effects of ISI strategy on Latin American economies?

Question 7

What are the factors that shape the success and failure of ISI strategy?

Question 8

Learning Outcomes

Question 9

What are the strategies of late industrialisers?

Answer 9

1. Import Substitution Industrialisation (ISI) -> adopted by Latin America
   Domestic manufacturing sector to shift comparative advantage to manufacturing
2. Export-led growth -> adopted in Asia
   Based on industrialisation through export-led growth annd labour-intensive production
   Low wages in Asian countries: basis to compete againnst manufacturers from high-wage developed countries where technology became standardised
3. ‘Developmental states’ -> adopted by Japan and East Asia
   Government plays a role in economic development
   State’s role concentrates on market coordination and avoiding market failures
   Key areas:
   1.) Education and human capital formation: investmentn innto primary and secondary education
   2.) Savings, investment and credit: setting up savings banks
   3.) Labour market institutions
   4.) Export orientation: creating export-assisting policies
4. ‘Washington consensus’ -> practised by International Bank for reconstruction and development (The World Bank) and International Monetary Fund (IMF). Emerged in Latin America (1980s: wake of debt crisis). Adopted by Eastern Europe (Soviety Block) (1990s)
   -> adopted in Latin America, Japan and East Asia, Russia and Eastern Europe
   Liberal market-based approach to development
   Based on limiting role of state to certain key activity areas:
   1.) Strengtheninng macroeconomic fundamentals
   2.) Public infrastructure
   3.) Law and order
5. Soviet model -> adopted in USSR and eastern Europe (post Second World War)
   Command economy: state owns all factors of production except labour and state does economy central planning
   Producers and workers must meet set targets

Question 10

What role did the late industrialisers strategies ascribe to state and markets?

Answer 10

1. Role of geography: disease, environment, soil quality, access to markets and natural resources
2. Historical context: product cycle, laissez-faire (protectionist international environment) and international organisations
3. The state and state strategies: level of state intervention into markets
4. Pre-conditions
5. Labour/lannd/capital-intensive path

Question 11

What is the inward-looking model of development adopted in Latin America?

Question 12

What is the economic rationale behind ISI strategy?

Question 13

What are the short-run effects of the ISI?

Question 14

//Who are the late industrialisers?

Answer 14

Latin America
Japan and East Asia
Russia and eastern Europe (Soviet bloc)
India and China
Africa

Question 15

//What are the main concerns of chapter 12-16?

Answer 15

1. Role state/markets play in economic development
2. Factors that underpinned success/failure of strategy
3. Role of pre-conditions (level of human capital, inequality)
4. If strategies can be copied by others