Industrialization and Development: A Comparative Analysis

By Ray Kiely | Go to book overview

Chapter Six

Import substitution industrialization
The previous chapter suggested that while global factors may strongly influence the development of a particular industrialization strategy, any convincing account of industrial development in the periphery must also examine local factors within a particular nation-state. This chapter examines one such local strategy: that of import substitution industrialization (ISI). The first section oudines an ideal-typical model of import substitution industrialization. I then investigate two concrete cases of ISI: Brazil and India. Finally, I conclude by briefly introducing neo-liberal criticisms of ISI, an issue taken up in later chapters.
ISI defined
Late industrializers in the Third World adopted an ISI strategy-in Latin America from around the 1930s, and from the 1940s and 1950s in the rest of the periphery. Although such a stxategy did not preclude export promotion (see below), it is only a slight exaggeration to claim that ISI was the development strategy from the 1950s to the 1970s.An ideal model of ISI was based on the following premises:
(i) the promotion of a domestic industrial base to serve the home market;
(ii) a consequent reduction in the widespread dependence on the import of expensive manufactured goods, and export of relatively cheap unprocessed goods;
(iii) the protection of domestic industries through tariffs or import controls.

The theoretical rationale for ISI strategies therefore was to draw on the opportunities offered, and eliminate the constraints established, by the world economy. The state was to have a central role in this process. First, it would boost industrial development by offering certain incentives to potential investors-for instance, by developing infrastructure and offering tax holidays. Second, it would directly protect domestic industry from cheaper imports through the imposition of high tariffs or quantitative import controls. Third, it would reinforce this protection through the indirect mechanism of state subsidies (cf. Shapiro & Taylor 1992:433-5).

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