Import Substitution Industrialization
Import substitution industrialization is an effective economic development strategy that enhances industrial growth. It enhances industrialization within a nation and is usually used with an aim of
- Reducing imports of goods and manufacturers
- Creating and providing jobs
- Saving on foreign exchange and
- Reducing international dependency
The United Nations Commission for Latin America promoted this strategy in early 1960’s. However, it was not successful because by then, policies aimed at promoting industrialization had been grounded by export led strategies.
The policy also advocates replacing imports with a wide range of domestic production. By reducing foreign dependency, it becomes easy for a country to grow its economy. The policy was therefore highly advocated by economists and more specifically Friedrich List since the beginning of the 18th century.
Other import substitution industrialization policies were also enacted by different countries especially in the Global South. The strategies were put in place with an aim of enhancing self-sufficiency through the creation of a highly functional internal market. Additionally, the industrialization policy helps to enhance
- Subsidization of a wide range of vital industries including power generation and agricultural industries
- Increase taxation and
- Develop highly protectionist trade policies
Import substitution industrialization was however gradually abandoned in many developing countries. This was due to challenges including structural indebtedness from industrialization policies. World Bank on the other hand had developed their structural adjustment programs to ensure market driven liberalization in the Global South.
1950s to 1980s was a crucial period of import substitution industrialization in Latin America countries. The policies and theories behind structuralism in the countries were organized by Celso Furtado, Hans Singer and Raul Prebisch among other structural economic thinkers. They gained prominence for their policies and within a short period of time, they created United Nations Economic Commission for Latin America and Caribbean.
Even though the theorists were not homogenous, they developed a very sufficient economic framework and shared a common belief. They believed in an efficient state directed economic development strategy. The economists also worked hard to promote industrialization through infant industry argument strategy.
Latin America economists and structuralism development approach was also very unique. This is because it was influenced by a socialist and Keynesian communitarian. Therefore, it is highly associated and linked with a depend theory. The theory later took a broader and effective sociological framework and addressed the causes of underdevelopment in different Latin America countries.
According to economists, underdevelopment in the countries was largely attributed to cultural origins. The group therefore had to work hard and find the root cause of the problems. This would make it easy for the economists to come up with real time and long term solutions to the problems. Historical effects of Euro-centrism, neoliberalism and colonialism were also addressed.
During the period of import substitution industrialist, the people of Latin America also embraced self-dependency policies. This helped to enhance industrialization nationally. The approaches spread within Latin America within a short span of time and after a few since the program was launched, agricultural and manufacturing industries among others had been greatly developed.
Import substitution industrialization is still practiced today in many parts of the globe and it has played a crucial role in enhancing economic growth.
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