The Process of Economic Development

By James M. Cypher; James L. Dietz | Go to book overview

10

Strategy switching and industrial transformation
After studying this chapter, you should understand:
• the limits to easy import substitution as the motor of industrialization and to overall economic development;
• the importance of strategy sequencing and timely strategy switches to successful development programs;
• the importance of export substitution as a fundamental phase on the path to industrialization;
• the costs associated with premature secondary or difficult import substitution;
• the importance of trade as a promoter of increased productivity and of more efficient technology use;
• the importance of public policy to augmenting resource endowments appropriate for future progress;
• the need to search for and promote dynamic comparative advantage and the role of "contests" in achieving this objective; and
• the key role of appropriate institutions in supporting warranted strategy switches.

Continuing structural change

In the previous chapter, we saw that the initial impulse toward a higher level of development comes with the movement of labor from agriculture toward industrial production and that this typically is achieved via easy import substitution industrialization (ISI) as relatively simple, non-durable manufactured goods are produced for the domestic market. This structural shift in the production process and of labor usage toward import substitution is common to virtually all successful and to many unsuccessful development experiences.

ISI is only the first step along a complex path of structural change that makes further progress possible but without guaranteeing success. No single development strategy is likely to be sufficient over time if economic growth and progress are to be sustained. Decision-makers, including those in government, need to be prepared to make changes in the prevailing strategy of development when it no longer provides the base for continued growth. The marks of good policy-making and of relatively

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