and Political Power
and a Theory of the State
If the decision to change industrialization strategies can be treated as a metaphor for the adjustment process in other areas of an economy, the transition from a highly protectionist, import substitution-based strategy to one that is less protectionist, outward oriented and export based plausibly serves as a metaphor for successful adjustment. Such a shift involves a 180-degree transformation in public policy, and one that is consistent with the standard prescriptions dispensed by advisory teams from the IMF and the World Bank. 1 Such a change in public policy would be expected to create a serious political backlash from domestic industrialists, entrepreneurs, labor unions and bureaucrats who are the most direct beneficiaries of an import substitution-based policy. In fact, there has been very little sign of such a backlash in those countries that have embarked upon such dramatic changes in their industrial policy. This is certainly prima facie evidence in support of the argument that truly successful adjustment requires the presence of a strong state.
It is tempting to dismiss that observation by pointing out that most of the economies that have moved from primary import-substitution to export-substitution strategies are governed by authoritarian regimes. That argument is undermined by the fact that the list of countries that have made such a transition includes Japan and Israel. Turkey shifted from secondary import substitution to export substitution in the early 1980s followed by Costa Rica later in the decade. By the early 1990s, Colombia and Argentina had begun a similar transition. In fact, when regime type was added to the reduced logit model presented in Chapter 5 (Table 5.5), democratic regimes had significantly improved odds of changing to an export-oriented follow-on strategy and a higher percentage of import-substitution to export-oriented industrialization changes (from 84.3 percent to 86.5 percent). These results are reported