Chapter3_State-Led Dvt

Chapter3_State-Led Dvt - Fatima Hirji INTD 200 Summary of...

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Fatima Hirji INTD 200 Summary of Chapter 3 Understanding Development – Theory and Practice in the Third World, 3 rd edition John Rapley Ch.3 State-Led Development in Practice p. 35-62 ISI –Import Substitution Industrialization (based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products.) - most third world countries experimented with this strategy after WWI, which at first was economically beneficial -third world govs wanted greater economic independence from former colonial masters and the current great powers -however by the late 1960s-70s, as the world economy slowed – the failings of ISI started coming into light Import Substitution Industrialization: The Early Decades Middle East (ME) and ISI -first moves into ISI took place in ME -during 1920s, Britain and France allowed their ME possessions greater freedom in determining - Persia (Iran) and Iraq set up development banks - Egyptian gov advanced funds through Bank Misr -thus in 1930s modest industrialization proceeded -then WWII cut off the ME’s access to Eur goods and the enormous Allied expenditure created new demand for local industry - Turkey - one of the boldest moves into state-led development took place -Turkey had one big advantage over other ME countries –independence which allowed it freedom to draft policies to build up its industry -nationalists led by Kemal Ataturk created the country in 1923 -in 1929-Lausanne Treaty which imposed free trade expired and as a result the lira (Turkish currency began to fall) -to save currency the gov decided to reduce imports -in 1930s Ataturk tried to follow Soviet’s economic success by erecting barriers to trade and adding more protectionist measures -Ataturk introduced Turkey to economic philosophy of Statism -implemented many state enterprises, some of which were wholly state owned and others public- private partnerships -to feed these enterprises, the gov used trading monopolies to take surplus revenues out of the agricultural sector - Egypt led the 2 nd wave of ISI in ME after \free Officers coup in 1952
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Latin America and ISI -around the same time Latin America gov faced with effects of depression, began implementing similar polices but not central planning - Mexico –in 1930s Pres. Lazaro Cardenas built up capitalism by a land reform program and by nationalizing the oil sector and railways -by 1940s, ISI structure was in place with high tariffs and in 1950s –import licensing (protecting industrialists operating in Mexico) -Cardenas also gave new enterprises tax holidays of up to 10 years, duties on imported inputs were rebated to manufactures and subsidized credit was given from gov bank- Nacional Financeria -gov invested heavily in infrastructure -these measures conspired to keep Mexican profit rates among highest in world -as a result both foreign and domestic investment boomed - Argentina, Brazil and Chile also implemented ISI strategy - Chile –gov created 140 public firms b/w 1940-70
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This note was uploaded on 08/26/2010 for the course IDS 200 taught by Professor Pushkar during the Fall '10 term at McGill.

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Chapter3_State-Led Dvt - Fatima Hirji INTD 200 Summary of...

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