Why isi failed

Dependency theorists such as Gunder Frank and Teodoro dos Santos suggested that ISI2 was simply a new form of dependency and imperialism.

See also the discussion by Cardoso , esp. The economic dependency of colonial times was described as exporting raw materials in exchange for finished products.

Under ISI2, according to these arguments, the dependency was merely transformed into an exchange of raw materials for semi-finished goods. Dependency theorists suggest that industrialized Latin America is now in the semi-periphery, used as a platform for multinational corporations who wish to exploit its cheap labor.

ISI2 also exacerbated financial dependency according to them, as illustrated by the debt crisis of the s. In short, ISI2 did nothing to improve international and national class polarization based on the mode of production specialization of each geographic area in the international production process ; in fact, industrialization exacerbated differences both internationally between Latin America and the North, and within Latin American countries.

A different strain of the attack on ISI2 comes from associating it with the political repression of the military regimes, best illustrated by Guillermo O'Donnell's theory of the bureaucratic-authoritarian regime, as one in which the military must intervene to hold down labour costs and related political mobilization as a part of entering late and limited industrialization.

ISI2 has also received a black eye from mainstream, neoliberal economists. Sebastian Edwards, a proponent of the neoliberal policies of the Washington Consensus, provides perhaps the best summary about why ISI is considered an abysmal failure:. By the late s, the region had, by far, the most unequal distribution of income in the world. To these problems, Edwards adds a low return on investment.

According to him, the debt crisis beginning in the s revealed the fragility of the ISI2 system. Edwards then goes on to explore the success of the neoliberal reforms. Even most former cepalinos agree that the parallel balance of payments, exchange rate, inflationary, and anti-agricultural biases were evidence that ISI as practiced was unsustainable. Could ISI have been fixed? As far back as early s, CEPAL was urging important modifications such as exporting manufactures, reducing urban bias, and increasing integration with other Latin American countries.

Albert O. Hirschman discussed the need for major adjustments in a seminal article in ; see Hirschman, See also Thiesenhusen and Baer In practice, the ISI2 model was pushed out by the oil price and debt crises by the s, when the present paradigmatic shift to neoliberalism was consummated.

While Chile instituted neoliberalism in the s, and Argentina began attempting macroeconomic stabilization policies inspired on neoliberalism from , as a whole the region did not embrace the new paradigm until the s.

See Hira Though dissenting voices were available, they have largely been ignored. Fajnzylber called for the restoration of macroeconomic stability through fiscal balance and control of inflation as well as an active state engaged in improving the productivity. Productivity improvements could include investment in physical and human capital; moving strategically from natural-resource based 'nonrenewable income' sources to renewable ones in agriculture and manufacturing; emphasizing continual improvements in technological capacity; embracing the idea of competing with the international economy; developing a competent public sector that enhances international competitiveness and works cooperatively in pacts between state, business, and labour.

Most importantly, he suggested that equity and productivity are not only compatible but mutually necessary. Unfortunately, these competing voices were drowned out by the sea of literature espousing neoliberalism. It is equally interesting, if not unexpected, historical development that neoliberalism has also sparked polarizing debates about its performance.

Beyond the expected dependency critics on the one hand, 12 12 For an overview of anti-neoliberalism from the left, see Ellner Lance Taylor summarizes some of these nicely as: 14 14 Lance Taylor , pg. This fragility is exacerbated by violent movements of external capital in and out of national economies via liberalized capital accounts.

Indeed, competition may have weakened in manufacturing sectors in which concentration of ownership has gone up in the wake of privatization. We think it is high time to synthesize a more comprehensive, empirically-based view of the performance of ISI2, comparing it with neoliberalism. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance.

Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Import substitution industrialization ISI is a theory of economics typically adhered to by developing countries or emerging market nations that seek to decrease their dependence on developed countries.

The approach targets the protection and incubation of newly formed domestic industries to fully develop sectors so that the goods produced are competitive with imported goods. Under ISI theory, the process makes local economies, and their nations, self-sufficient. The primary goal of the implemented substitution industrialization theory is to protect, strengthen, and grow local industries using a variety of tactics, including tariffs , import quotas , and subsidized government loans.

Countries implementing this theory attempt to shore up production channels for each stage of a product's development. The Import Coefficient Problem 5. Regional Inequalities 5. Neglect of Agriculture 5. The s: Import-Substitution Industrialization in Crisis 5. The Oil Shock of and Its Consequences 5. The Debt Crisis and Its Aftermath 5. Inflation Targeting, Interest, and the Exchange Rate 5. Import-Substitution Industrialization Redux? Industrial Policy under Presidents Lula and Rousseff 5.

Go to page:. By continuing to browse this Website, you consent to the use of these cookies. In the wake of Galwan events, a consensus has emerged that India needs to distance itself from China in its international trade.

There are three possible policy driven avenues to this goal: tariffs that apply to imports from China alone; tariffs on all imports of products of which China is the principal current supplier; and more favourable treatment of imports from non-China sources through free trade agreements. The first of these options will require invoking the national security clause of WTO rules, which India can justifiably do given the hostilities on the border. But it will most surely invite retaliation by China, which may include restrictions on its exports to India of products that only it can supply or supplies at costs far below those of the next best alternative.

Given the fragility of our own economy today, this is not a desirable route. It will take time, patience and some hard negotiation but it is the option that India must exercise. If the agreements are forged and strengthened with entities such as the EU, UK, Japan, Australia, Canada and eventually the US, they will complement our strategic relationships.

But it is the second option that seems to find the greatest favour in India at present. For it nicely fits into the broader import substitution instincts of many in India, both in the government and outside. But hard-nosed economic analysis and critical assessment of available evidence reveals it to be the most treacherous route. For starters, import substitution industrialisation ISI , which entails progressive replacement of imports by domestic production, is precisely the strategy we had pursued until That year, we finally recognised its total failure and switched to outward orientation.

Those seeking its revival argue, however, that it will be different this time. Rather than take them for their word, let us examine whatever evidence exists.