Lecture 5 Notes

Lecture 5 Notes - Garrett Brnger Lecture 5(of notes 6th...

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Garrett Brnger 2/5/08 Lecture 5 (of notes, 6 th Lecture overall) Import Substitution (ISI) Definition Promoting a country’s own goods by blocking imported ones Origins: Latin America – very nationalistic origins; Economic Depression Elite Abandon Comparative Advantage Model Characteristics : o Industrialization – made possible by imposing tariffs; tariffs up for long periods of time to protect industries Necessary : sufficiently large market , people with purchasing power for product being produced & political stability o Inward oriented o Trade protectionism o Strong state Ownership: provided goods and services to facilitate capitalist development (due to lack of initial local investors): proliferation of state – owned enterprises (utilities, electricity, postal services): ended primarily in the 1980s. Subsidies: keeping down price of bread, oil, food kept down price of living for the poor incentive to move to the cities where industries were located made urban living more affordable; Oil subsidy helped industrialists and factory people/transportation higher profit margins Tariffs/protectionism One of major ways state intervened made foreign imports expensive to make domestic goods compete o Mexico, Brazil, Argentina pioneered Picked up in Africa and briefly in Asia o Nationalist, but MNCs move in (51% rule) o Development emphasis o Not imposed by DCs o LDC policy of choice: Military – has been strong in LDCs
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