Import Substitution Industrialization and Its

CEU eTD Collection

In partialfulfilment the of requirements for the degree of Master Arts of Department International of

I AND ITS ITS AND D MPORT EVELOPMENT

C S

UBSTITUTION UBSTITUTION ONDITIONALITIES FOR B Supervisor: Dr. Thomas Fetzer

RAZIL AND

Central European University European Central (Word Count: 13,9 -

Budapest, Hungary Stefan Neumann A

Submitted to Submitted C 2013 OMPARATIVE By

Relations and European Studies S

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CEU eTD Collection overcome ISIovercome distortions institutional capacities of the state less effective and efficient. South Korea could ISI fosteredequality. rent on socialeconomic and outcomes. ISI A conditions which under institutional structure growth and a structural a change and shows industrial higher growth to rely on a growth- ona to rely

bstract state autonomy and a functioning bureaucracy, income distribution and social income and distribution bureaucracy, functioning a and state autonomy This paper investigates basis the cross of a on

cum

and socialand justice within the - Import (ISI) Substitution Industrialization debt strategy in order to deal with the distortions the with order strategyin debt to deal of ISI. and shiftand - and madeand Brazil seeking activities and South in Korea ed caused several distortions that had negative impacts

to wards i

export

- society due to its growthdue oriented inherited

in Brazil. Nevertheless - regional comparative case study .

The other can lead to different

side of the coin side of coin the ,

Brazil had had CEU eTD Collection 2.Chapter Bibliography Conclusion 3.Chapter 1. Chapter – Chapter 1. Introduction

2.1 Case Study:2.1 ISI Brazil in 1.4 Dependency Theory Dependency 1.4 1.3 Neoclassic Theory 3.2 Economic Development 3.1 Conditionalities 2.2 Case Study: ISI in Korea 1.1 ISI1.1 Theory Literature Review 3.2.1 Industrial growth 2.1.1 Historical context 3.2.3Income distribution 3.2.2 Industrial employment 3.1.5 Foreign Direct Investment 3.1.4 Shift towards EOI 3.1.3 Regime type 3.1.2 Bureaucracy Land3.1.1 reform implementation ISI 2.2.2 2.2.1 Historical Context 2.1.2 ISI implementation ISI 2.1.2 - –

Comparative Analyses: Comparative

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Case Studies

Theoretical Framing ......

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44 18 18 15 13 51 48 44 45 41 34 25 24 29 29 35 30 29 24 20 18 53

7 4 7 1

CEU eTD Collection 903f. Introduction 2 1 links thissyndrome’, which state academic interpretation of ISI. ISI is mainly attributed to the ‘failure strategy. - outward towards countries an Asian shifted East South 1970s,the the in in the 1950s and 1960s. theWhile bulk of Latin American countries adhered to ISI also t in state of the of Import paradigm the ( Substitution Industrialization thus- and decision reflects internal development production of those goods thatwere state imported. previously a is ISI industrializatio countries.developed (ISI) Importone only Industrialization Substitutionis and increased GDP per capita and at the same time show the research. America. Furthermore, many research papers review their impacts crisis rent and seeking. Even thoughsome authors Substitution Trade Policy." In In Policy." Trade Substitution 2012: 53f.

Henry J. Bruton."A reconsideration of import substitution." import of reconsideration Bruton."A J. Henry Houssam

Developing countries pursueDeveloping different economic The reason ISI

2 -

Eddine Bessam, Rainer Gadow, and Ulli Arnold. "Industrialization Strategy Based on Import Import on Based Strategy "Industrialization Arnold. Ulli Gadow,and Rainer Bessam, Eddine The outcomes of ISI are still controversially discussed thus and Thestill justify outcomes ofcontroversially further ISI are prevailed as Industrialization strategy

interpretation lacks n strategy among others. It others. aimed strategyn among he frame of different development trajectories.

for cho for Designing Public Procurement Policy in Developing Countries Developing in Policy Procurement Public Designing osing this research topic was

analyses of historical patter - led approach with approach export led 1

ISI wit mainly making processes. making

in thein majority of c developing

Journal of economic literature economic of Journal

emphasize hig emphasize

) allows us role) onthe allows toISI focus at strengthening the domestic the domestic strengthening at

determined strategies to catch up with ns institutional causality. and -

hin borders the of Latin bias, balance bias,

negat 1 Thus, u Thus, her industrial output ive socio ive - , thesis’ or the ‘ISI

Springer New York, York, New Springer

by the commonthe by 36, no. 2(1998):36, no. - led of model - nderstanding of - - economic payments oriented oriented ountries - CEU eTD Collection foundations. variables, hypothesis, causal mechanisms, and causal paths comparative case study (cross distributionindustrial industrial income growth, and socialboth economic and terms. The indicators to economicmeasure development are ISI ofin to show ramifications the indicatorsorder in define will of this author the thesis macroeconomic features. its and state structures of the organizational institutional and are variables Condition M Substitution Industrialization. allows me to generate knowledge with technical instruments. lead development?to economic can ISI under which 7 6 5 4 3 development oneconomic impact influenced the have organizations and groups specific of actions of the analysis the in effects of institutional assertions ground ISI for(…), example what is the causal relationship between…’ Michael Keating state: ‘Positivists…want toknow what factors cause which outcomes strategies under authoritarian Journal rule." of International Relations Development and sciences social in methodologies Approaches and (eds.), Keating Michael and Donatella Porta, In Della introduction.” epistemological 2005: 75

Vinícius Embedded Evans. autonomy: statesPeter and industrial transformation 29 Ibid., An sciences? social the in approaches many “How Keating. Michael and Porta Della Donatella sciences social in the development theory and studies Case Bennett. Andrew and George L. Alexander conditionalities for development trajectories forconditionalities development For approach methodological this my purpose The The The author foc

Rodrigues Vieira. "Invisible legacies: Brazil's and South Korea's shift from ISI towards export towards ISI shift from Korea's South and Brazil's legacies: "Invisible Vieira. Rodrigues . ”

research question

7 6 Based institutional onthe setting the author looks at state how actions Institutions refer Institutions to soc

Cambridge University Press (2008): University Press 21 Cambridge . Cambridge: implementation uses comparativeinstitutional onthe approach Economic development is to scope the Economic due term broad and a -

regional) regional)

of this thesis reads follows: as reads thesis of this .

y dependent variable is economic development. is economic variable dependent y

. ISI of ial mechanisms (i.e. patronage) and its structural -

the aimthe is of to “ which 2

Nevertheless, furtherISI condi . As Peter As . employment. ”.

. Princeton University Press, 1995: 19 1995: Press, University . Princeton The The 3 f my thesis thesis my of The methodology independent variable is variable Importindependent will be based be onawill heuristic Evans pointsEvans out its “ aim 5

Donatella Della Porta and

(2013) Are there conditions there Are inductively identify new in order to analyse : 2f.

. Mit . tions had

Press, Press, is to to is CEU eTD Collection overcome the distortions of ISI and strengthen export distortions the strengthen ofand overcome ISI to able stakeholders were policy Korean structural to Due this foundation era. colonial that hampers development per se but different motivesISI forbetween the position different Both. structura countries inherited affectedboth countries were differently by the Cold War to their due geopolitical statethe apparatus both and countries experienced rule. authoritarian powers shaped colonial directions.former Intrajectories tookboth different countries out when find countries. Thus, to American author the wanted NICs in South East Asia are regarded as more represents South Korea and of four one the tigers. Asian author these chose two countries because Brazil is the largest Latin American country 9 8 his knowledgeauthor to deepen onISI: “ development economics. The following statement Henry by J. Burton the motivated growth André demanded. was more foreignborrowing ISIlonger the prolonged social and costs economic high produced overand time both unsustainable was substitution foundation forchange structural policy led economicdevelopment todistortions political and discrepancies, which (2011): 56f. Economies of Argentina and Brazil 66

The David The Baer and Fleischer. Werner In “A view bird’seye Villela. ofindustrialization” Brazilian André M. Patrice - Korea Korea The The South Korea. other hand the on and Brazil hand onthe studiesMy case are Above all, the for the this all, choice t thesis Above cum

Franko. Franko. - debt strategy.debt inherited The puzzle of Latin American economic American Latin of puzzle The

effect institutions state . a 9

A Comparative Perspective coherent, autonomous state bureaucracy from Japanese statecoherent, bureaucracy autonomous

. The author refers to refers author The

it is the capacity of the state to deal with two countriestwo not cruc are Import Substitution refers to a set why Substitution of ideasabout Import 3 . Thisas ISI thesis show will deliberate that

development : Edward Elgar, Elgar, : Edward Northhampton and Cheltenham . opic is based on the author’s in onthe interest isopic based l f successful successful oundations. . Rowman & Littlefield Publishers, Littlefield & . Rowman 2007:

- Patrice M. oriented growth. Therefore, growth. oriented

The The

the same time l time same the at but development development paths of the than those of the Latin the thosethan of ial. ial. and why development why and

Franko: “ It is not bureaucracy It not is

On the other hand Villela calls it (…) (…)

economic .” ,

ay the 8 import import The The

the the

CEU eTD Collection conclusion regarding the regarding conclusion last sectionof this thesis ISI frame the how in at indicators. canevaluated looking be ofwith development The close chapter investigated. will thoroughly are differentdetermining development conditions of ISI development. The for economic of role the state and its r outlines comparative the chapter research The third South Korea. and Brazil ofin analysis ISI empirical the focuseschapter on placed in the the in ofto development major ISIcontext placed according facts. to ISI its thatrelate concepts and conditions mass poverty has prevailed and continue University Press, 1990: 13 12 11 10 t Furthermore, ISI implementation. of countries context the in developing institutional of setting role internal, the of decisive The author shows Review Literature rich, and about ageneral approach to elimination of that poverty. capacities b capacities development differentlyto earlyindicators ofacademic economic contributions. recent ofThe ISI analyses to have put torelation in be different of periods. time more Data

Stephan Haggard. sciences?”,26 social the in approaches many “How al., et Porta, Della 904 substitution”, import of reconsideration Bruton."A 11

academic papers are able to use more disaggregated data and thus interpret as follows: The first chapter outlines theories and as follows: The firstThe chapter thesis organized is Stephan Stephan Th eyond the reach of the most developing countries of developing reach most the eyond state’s role and its institutional settings are are settings its institutional and role findstate’s authorthe triesoute how to Haggard states: Pathways from the periphery: The politics of growth in the newly industrializi newly in the growth of politics The periphery: the from Pathways

that previous literature looked atvariables for looked literature diverseconditional ISI. that previous

research question.

the author the

“ s to prevail in many countries while other countries have grown grown have other countries while countries many in s to prevail A rational ISI strategy demanded political and administrative his of statementthis selection supports case thesis the

give

s 4 allows the author to elaborate on the onthe allows It author the to. elaborate

an overview of his findingsd an , which will be tested relation be in to will hard which ,

. ” 12 This statement demonstrates the the demonstrates This statement ” 10

paradigms ng countries ng .

The second draw . Cornell Cornell .

ole ofole In the In the s

a CEU eTD Collection (March 2009) UCLAat (March post the in learning technological Interpretations." America." hypothesis of ISI. ascribe inefficient industries distortions and ISI postulate and to stagnationista scholars. At the same time Baer emphasizes that industrial output has increased. market and structural distortionsISI, of therefore reflecting the criticism ofneoclassical and expertise due to avariety of rationales. Thus, ISI was meant tofail. acquisition.knowledge The mechanisms of ISI prevent to BrutonISI. According development advancesin rest and onconsistent learning implementation in implementation to different the due 18 17 16 15 14 13 P encounters.’ it trouble any into failure of total evidence to read too only oneis Hence ready it to order supply was social did all manufacture! the and to change expected Am failure neglect of agriculture, underutilization of capital, effective rates). Brutongrowth. it ‘ labels thus refer to authorVillela the will who evaluated the long

olitical olitical Ibid. 32 Ibid. import "Revisiting Colistete. P. Renato Ibid., 911f. Werner Baer, “ Bruton

letO isha."h oiia cnm fimport of economy political O. "The Albert Hirschman. erica with the then existing expectations and its outcomes - thesis of ISI is not undisputable. not is thesis ISI of , Authors like Sebastian Edwards, Victor Bulmer Victor Edwards, Authors Sebastian like In 1970s the it became thatevident ISI not did lead to long ‘failure onthe Burton builds J. Henry Baer and Werner by done Work In contrast to the majority of scholars, Albert O. Hir of scholars, O. Albert toIn majority the contrast

"A reconsideration of import substitution", import of "A reconsideration h urel ora fEconomics of Journal Quarterly The E conomy of Import Substitution Industrialization in LatinAmerica” in 1968, in of Importconomy Industrialization Substitution

Latin American Research Review Research American Latin Import Substitution and Industrialization in Latin Amercia: Experiences and and Experiences Amercia: Latin in Industrialization and Substitution Import 16 South Brazil. and Korea : 3

inherited -war years." In Conference on Latin America, Globalization and Economic History import substitution syndrome

institutional setting institutional substituting industrialization in Brazil: Productivity growth and and growth Productivity in Brazil: industrialization -substituting

82, no.82, 1(1968): 3

7, no. 1(1972) no. 7, 17 He associates the failure

903

s ands how these legacies effected ISI

18 Hirschman wrote his paper “The “The paper Hirschmanhis wrote substituting industrialization in Latin in Latin industrialization -substituting ed -

term ’ - actors to improve their skills

Thomas or Stephen Haber Haber Thomas Stephen or (overvalued exchangerate, effects of schman claims 15

- : “ thesis of ISI in Latin Latin in ISI of thesis Industrialization was 13 B - ISI. term aer reflects on

- economic 14

thesis’ ofthesis’ that thethat

CEU eTD Collection for exportorientation. la a endowment, Thoumi to and Teitel According Brazil. export the alsoquestioned 1970s.They numbers the in of exports from benefited I oligarchs industrial that Franko pointsand distribution out gives onincome noinformation capita higher growth rates GDP in per capitaBrazil in illustrate ISI infrastructural thatindustrial and and was achieved. change ISI to increased led numbers exports of manufactured manufacturing and productivity 21 20 19 exports experience of Argentina and Brazil." and Argentina of experience exports

Teitel, Simon, and Francisco E. Thoumi. "From import substitution to exports: the manufacturing manufacturing the exports: to substitution import "From Thoumi. E. Francisco and Simon, Teitel, “ Franko, import "Revisiting Colistete, Teitel and Thoumi and Teitel In similar a a vein, The puzzle of Latin American economic development economic American Latin of puzzle The rge domesticrge skilled high forcemightbe and labour market not suitable 21

substituting industrialization in industrialization -substituting as such. notSI industry the and as

uthors like Teitel and Thoumi or Ros Thoumi and Teitel or like uthors attribute ISI industrial maturing togrowthprocess a high and

Economic Development and Cultural Change Cultural and Development Economic , who wrote their paper in 1986, in their paper wrote who , 6

Brazil”, 3 ”, 64f.

emary Thorp show Thorpthat emary Franko highlights that - su led growth strategy for ccess

34, no. 3 (1986):34, no.486 3

. natural resourcenatural

But

GDP per GDP per

CEU eTD Collection instrument, production. Large domestic own their with North rich the from imports to replace was strategyfor development appropriate articulatedby Alexand mechanisms international Commission (ECLA forEconomic LatinAmerica income elasticity f ISI can have different origins. O. Albert 1.1 1 25 24 23 22 – materials forproducts raw demand agriculture and lower North the about in brings income higher time rates.same the pressure At onwage downward the unions contributedto weak and workforce of exporters, surplus the secular negative terms of trade effects (Prebisch by caused South the was in structure, productivity lower monopolistthe manufactured Southern countries. labour, were wars, growth of the domestic market and deliberate development policy. process. ISI one development”

. Bruton, Bruton, periphery”, the from Pathways Haggard,“ Ibid. Import of Economy Political Hirschman,“The

Chapter ISI Theory

secular and Hans Singer highlighted division thatthe of Hans Singer and The structuralists Prebisch As deliberate development strategy the main rationale thus economic structural discrepanci "A reconsideration of import substitution", import of "A reconsideration (… , 55 )” ” declining t declining

– -scale planning, rather than the market, was assumed to be the appropria te He describes He four ISI: motives behind balance

or primary products or primary Theoretical Framing Theoretical

While productivity growth in the growthin While productivity North wagesto to higher due led er Hamilton and Friedrich List and er Hamilton erms trade, of

of the world economy with the infant the with economy of world the

9f.; 9f.; Franko, “ Franko, . Raú

Substitution“, 5 -Substitution“,

price v Hirschman underscores: “ Hirschman l The puzzle of Latin American economic economic American Latin of puzzle The 7

Prebisch 907

es, hindered economic devees, economic hindered -

Singer thesis).Singer comp The olatility of products primary ) ,

combined his scepticism towards the his scepticism combined ,

the director of the United Nations United the directorthe of . 24 ISI proponents “ incomeelasticity of

for the advocacy of ISI - of - Clearly, there is not just just not is there Clearly, - payment difficulties, industry arguments industry 23

etition between believed that the in lopment

and low and demand demand - CEU eTD Collection arguments). Latin America worse off America Latin another level, this argument contains and unusual conclusion: ‘trade is commodities would have to be exported to obtain any given amount of manufactured goods. Taken to of paymentsbalance problems ofcountries developing declines 31 30 29 28 27 26 onca depends economy of The an industrialization production hasenforced. to be domestic Instead North, rich of goodsthe importing from implemented. manufactured sufficient, economic the structuralin changes system to be of South the need of dynamism sector. importance the traditional the within importance of agricultural development. Several agricultural economists have emphasized to bemodern needed fostered. formation capital hence the goodsand in were state´s notthe at capital zero, disposal negative effects for economic development. The marginal product was deemed to be Southern the in one dominant Lewis. Lewis differentiated between amodern and traditional sector, the latter one the to protect the balance of payments, orstop. or slow growth would “ of income, exports growth and between “ Political Economy Political Developmental New a “Toward et.al. Perrotini, Routledge, 2011: 145 Engel Ernst statistician German the after named curve &Business of Ecomomics Review International Zagreb In Destruction” The de

Ibid. Ibid. 909 Ibid., Bruton, Ibid. Javier A. Reyes and Charles Sawyer.York: Latin American New and Economic Development.London H. W. Singer: “Beyond Terms of Trade: Convergence/Divergence and Creative/Uncreative

clining terms of trade for developing countries would mean that over time more and more and over more that time mean would countries for developing of trade terms clining Bruton implementation the explains Bruton emphasis thatthe put dual was onthe claims "A reconsideration of import substitution", substitution", import of "A reconsideration –

thereby reducing the demand for reducing demand importsthereby the South the (Engel from 26 , Vol. 37, (Fall 2008):, 55; Vol.37, Supply for manufactured goods was more elastic, thus explaining the the thus for goods more elastic, was explaining Supply manufactured

. ” 28 If countries in Latin America have anegative correlation Countries. The predominance of traditional the Countries. Thesector predominance had

Bruton, Bruton, 30 Nevertheless, Lewis underpinned theNevertheless, Lewis underpinned economic Paradigm for Latin America.” In International In Journal America.” Latin for of Paradigm 905; Engel Engel 905; substitution", import of reconsideration "A then import substitution of some kind must take place take must ofkind some substitution import then 8

905

of ISI. When market interve

, Vol.1, No.1, (1998): 13 (1998): No.1, , Vol.1, ” 29

27 31 . Reyes and Saywer conclude:

sector model of W. Arthursector of model W. making developing countries of developing countries making 14; -14; ntions not are Ignacio Ignacio - Curve Curve pital pital CEU eTD Collection 2011: 600f. Smith. C. Stephen, and P. Michael Todaro, see: tools protective of instrument toassess thenecessary levels of investments. combining an overvalued rate an combining exchange (to attract investment) introduction the with of were preferred. materials were attracted by preferential import exchan goods imports domestic by foreign and firms enjoye goods. of capital to domestic the production ofleads stage ISI final the goods and intermediate and shift consumer durables substitution goods, follows then towards of the consumer highly sequential becomes substitution country. the within industry, so investmentstructuralistsgoods heavy in and formation capital postulated 41 40 39 38 37 36 35 34 33 32 forneed more complex which technology, the did country not possess. Furthermore, production the of goods capital was a to investment attract and formation tocapital encourage a within state´s boundary. foundation for investment decisions. The overvaluationof exchange the rate meant was the as serves output. ICOR Thus, unit of a to required capital increase additional incremental capital/output serves ratio(ICOR) instrumentas an to determine the for capital numbersinvestment. The but large labour lacked with abundant of unskilled quotas or import licensing. goods capital priorindustrialization. and to of any acquisition intermediate the Latin American Reserach Review 40,3 (2005): 104 (2005): 40,3 Review Reserach American Latin

Ibid., 906f. Ibid., 908 Ibid., Ibid.,907f. Bruton, Franko, Bruton, 98 Amercia”, Latin in Industrialization and Substitution “Import Baer, 6 Substitution“, Import of economy political “The Hirschmann, In Dimensions.“ New America. in Latin structuralism of economic decline and rise “The Joseph Love. L. 6 Substitution“, Import of economy political “The Hirschmann, 34 Hirschmann persuasively suggests industria thatthe Hirschmann persuasively "A reconsideration of import substitution", substitution", import of "A reconsideration substitution", import of "A reconsideration The puzzle of Latin American economic development” economic American of Latin puzzle The

37 Protectionist tools to substitute consumer goods 32 Hirschman effectively argues that “ 38

The incremental capital , o r thightly staged, affair.” 9 911 911

: 60. For an For : 60.

ssociated with higherssociated with costs the and

ge rates. Economic Development d privileges industrialand raw

detailed overview of the overview detailed mechanisms - 33 39 output the ratiowas main The fir The

Developing countries were lization process starts with 36 industrialization via importindustrialization via Thus, strategic imports imports strategic Thus, s

t stage refers to the tothe refers stage t were tariffs, import import tariffs, were . Eleventh Edition. Edition. . Eleventh 35 41 Capital Hence, 40

CEU eTD Collection technology) and soon the underdevelopment would be at the at hand be would underdevelopment soon the technology) and Substitution Industrialization - Substitution Industrialization state a industries most the important in bottlenecks the of entrepreneurship technology, infrastructure, and thus thin neck. a In order to crash linkages. Land, labour and capital were prohibited from expanding since there was alack thin (bottlea concept bottlenecks with an the introduced of metaphoric neck) the technological change were the engine to catch up with the centre. Albert Hirschman’s protectionist tools. strong A state, spill over affects to domestic suppliers and Optimism was prevailing: “ th limit to instrument an were licenses or import tariffs 46 45 44 43 42 ISI since approach is inward an to previous the subchapter Referring 1.2 ‘ states: initiate the engine for economic development: backward and forward linkages. dependency theory dependency of theory the development and neoclassic the to outline is it important , Moreover development. development. process economy of Import Substitution“, 16 Substitution“, Import of economy

Evans, „ Evans, Ibid., Franko, Bruton, “Import Baer, Institutional approach Institutional

56 Market failure to produce sustainable growth provided the rationale f . Industrial thrive only development could within rel country the 46

"A reconsideration of import substitution", substitution", import of "A reconsideration

“The puzzle of Latin American economic development economic American Latin of puzzle “The Embedded Autonomy: states and industrial transformation“,

Substitution and Industrialization in Latin Amercia”, Latin in Industrialization and Substitution The author will analyse t

and analyse how those paradigms interpret state’s role for economic for role state’s those interpret how paradigms analyse and

just get the investment rate up, import capital (with its bulit its (with capital import up, rate investment get the just

could stimulate demand for intermediate products and and products for demand intermediate stimulate could - looking, state t he author ofhe this foll thesis he state 10 909

led strategy of economic development ’s role ’s

.” ”, e balance of payment pressures. 43 “The political political “The Hirschman, 56;

100f. in economicin transformation - led intervention – intervention led

or state intervention or state ows institutional the 44 ying on Franko Franko I .’ mport 45

in -in 42 d .

CEU eTD Collection blamed for internal misconduct and is for misconduct and overemphasized internal blamed countries over their affairs. own The leverage of the international system cannot be whole’ (the international system) dominates and incorporates ‘the parts’ (states). Dependistas saw the cause for the periphery’s unequal development in external factors of role politicscrucial and institutions 54 53 52 51 50 49 48 47 social lessbroad on hinge implemented they which in fashion determined by political interests within thestate: ‘ suggest and are biased and ideological as the ‘bourgeois science’ outside whole grant the part any autonomy, any specificity, and particularity independent of its membership of the to refuses it that but manner, global a in events processes and political and of economic interconnectedness criticizes the holistic approach: ‘ nditions co unequal neglects to analyse the policy choices of respective governments thus internal reason for reflects flaws onthe only economic system. injustices ofand international The the theory the unequal stratificat Kohli, A., ed. The State andThe Development ed. in A., Kohli, the ThirdWorld.

Ibid., 35 Ibid., 37 Ibid., 36 Literature”, of Development Underdevelopment Smith, “The 30 Ibid.; Tony 9 Ibid., Ibid.,16 “P Haggard, .’ 52 Smith.“The Underdevelopmentof Development Literature: The Case of Dependency Theory.” In

s Smith recognizes the complexity of systems

Tony Smith suggests Haggard states that the neoclassicand theorists both dependency disregard Haggard Haggard as well as inside the organization of state. the organization the

athways from the periphery the from athways suggests . 49

ion of the international economic system economic ofion international the . 53 According to Smith, dependency theorists differentiate to tofail Smith,dependency According that policy choices and strategies of development are of development choices strategies and policy that

alike. D alike.

The error of this approach is not that it draws attention to the ”, ”, 9 ependistas neglect the responsibility of the Southernthe responsibility the of ependistas neglect

in in determining determining 11

Princeton: Princeton University Press (1991): 27 (1991): Press University Princeton Princeton:

, but, that argues changes come from The strategies that state pursue and the pursueand state that strategies The structural forces than on the politically the on forces than -structural positive development indicators 50 . 54 Dependistas claim that ‘the . As unit of analysis Smith 48 .

The dependency theory theory The dependency 51 Smith Smith

. 47 -

CEU eTD Collection constraints formulate independently their goals can way the thatresponsible paving indicates for autonomy those actorsare who economic ofpursuing in state importance autonomy effective the of theimportance institutional context for the success of ISI when they conflict with the interests of particular fractions of the dominant class of dominant fractions the interests with the of particular conflict they when relat knows ofdifferent autonomy concepts The degree state. inequalities Cardoso Henrique Fernando driv 61 60 countries." industrializing newly Asian 59 58 57 56 55 performance around and agenda of industrial tr states:strengthening state development.therebetween Evans crude ‘(…) the correlation a is the question lies on state’s capacity and its effective Peter Evans argues that once state’s central role in struct policies do the they of pursuing capable are states some why understanding exhibitover continuity set that of(…) Institutional institutions time institutionalist of perspective Meritocratic recruitment and long society. from isolated tosurrounding be its need and bureaucracy coherent a require The Politics of Economic Adjustment 1992: 142 Adjustment Economic of Politics The eds., R. R. Kaufman, and S. In Haggard, Change.”

Peter Evans, “The State as a Problem and Solution: Predation, Embedded Autonomy, and Structural Structural and Autonomy, Embedded Predation, Solution: and a Problem as State “The Evans, Peter Ibid., 205f. East and American Latin of comparison a industrialization: of economy political "The Jenkins. Rhys, “ Franko, 9 Ibid., Ibid. 4 periphery”, the from “Pathway Haggard, en choices of state elites of choices state en ive autonomy, which enables the state to follow the interest “

Autonomy ofAutonomy the state is precondition a of successfula strategy. development The puzzle of Latin American economic development economic American Latin of puzzle The .

60 in the international economic system international the in economic

.’ 55

At the same time he argues: “ ‘

argued who Max Weber. The German philosopher argued that states thatstates Thephilosopher German argued Weber. Max

Development and Change -

term career perspectives were the basis for an without classconsidering hierarchy or other th 12 at it at was possible injustices to overcome and

ansformation

by autonomous activeand involving an

. 22, no. 200 2(1991):

Rhys Jenkins refers tothe concept of

“, 54 ural change has been change ural recognized (…).

The state’ is not only actor an not but an is state’ The

and ’ .” 61 56 durable institutions for Thus, highlights he the Evans refers to

variation of capital even whole, as of capital .” policy 57

Franko refers to to refers Franko Jenkins highlights - making. State

is critical in

the the 59

CEU eTD Collection interference of particular of particular interference class.groups dominant or of the describes strongstates being as able to formulate and implement policy goal ( involvement transformation industrial in state basisfor successful structural underlying the provides autonomy’, pointsEvans ‘embedded out: “ “ effectively working state apparatus. 68 67 66 65 64 63 62 concept: the success. State interference is seen as detrimental for the public sector. Franko outlin Market economics. development of field the proponent major in one economistsNeoclassic are thu ‘failure s the ISIand propose distortions economistswith Neoclassic associate 1. industrialization like transformation periods intelligenc further saw and the state apparatus rather society and Bates links state reference to corporate coherence, Migdal emphasized the is favour of strong in The problem is separating the benefits of insulation from the the from costs of isolation. of insulation benefits the separating is problem The

Jenkins, "The poli "The Jenkins, Evans, ” transformation industrial and states autonomy: “Embedded Evans. Evans, 40 Ibid., 36f. Ibid., 12 transformation”, industrial and states autonomy: “Embedded Evans, 3

Neoclassic Theory - property rights and aprovider of alimited array of publi and of rules guarantor a as state role for the minimalist see a therefore theorists neoclassical “ In contrast, Alexander Gerschenkron based policies with little or no government control are the key for economic for key the control are or little nogovernment with policies based “The State as Problem a and Solution “The State as Problem a and Solution e and the ability to rely on decentralized private implementation

oreign trade and international prices should become the engine for growth…Strict growth…Strict for become engine the should prices international and oreign trade

tical economy of industrialization”, 200, 203 200, industrialization”, of economy tical

an ins an - soci ulatedbureaucracy. Weber

ety ties with rent seeking. 62 T …) ogether with Joel Migdal and Robert Bates “, 147f. “, 147f. A state that was only autonomous would lack both 13

embedded society the in than insulated.

need to rest on a strong state. strong a need on to rest and and Albert O. O. Albert

c goods such as defense as c goods such 68 justifies his approach with the with justifies his approach , 12 63

Evans reflects on insulation: reflects oninsulation: Evans

polarity between state and Hirschmann . ” 66 Evans ” 64

further took one step s without thes without . The private 67

says that Jenkins Jenkins , -

thesis’. Weber es es 65

CEU eTD Collection International Business and Economics and Business International E and Substitution "Import trade mic internationalthe econo structure and downplay to pursue market ofadvantages international the division of labour forcountries developing and endorsed international economy, but that the nature of dependence has changed. the on less havedependent they that become mean model does not industrialization substitution import impe outlineinterventions and theorists applications governments forand Neoclassical policy misguided attacked 76 75 74 73 72 71 70 69 goods composition of i interdependenceeconomic Liberal economists who favoured trade openness deemphasized the asymmetry of maturation learning entrepreneurial and “ intermediate capitalintermediate and the goods and export to bias led longa payments deficit. Elsenhans, Hartmut. Nord Hartmut. Elsenhans, p.15 1973, (Budapest), No.57 Countries, on Developing Studies Openness did not preclude LDC industrialization but rather encouraged technological adaption,

1970s." (1996): 25; (1996): -1970s." 1890s Brazil, in Growth and Abreu Paiva de Abreu et al. Substitution "Import America”, in Latin Industrialization and "Import Substitution Baer, Underdevelopment," American Latin of Process the of Future Osvaldo and Sunkel, "Past, Present 9f. periphery”, the from “Pathways Haggard, 11 Ibid., 10 Ibid., 9f. periphery”, the from “Pathways Haggard, “ Franko, rfections rfections . 70

were more expensive than the imported the ones. than more expensive were Free trade brought about predominantly advantages for advantages countries: broughtNorthern predominantly Freetrade about good for all. for good the generate greatest will Smith’s hand, invisible Adam and motive profit the sector, through The major criticism of

The puzzle of Latin American economic development economic American Latin of puzzle The occurred mports

- 73 ” conforming approaches. Theyconforming approaches. reject Osvaldo Sunkelstates Osvaldo that “ 69

- Süd xport Promotion: a continuing dilemma for developing countries." developing for dilemma continuing a Promotion: xport ,

. 75 - rather rather Beziehungen. Geschichte Beziehungen. Furthermore, domestically produced intermediate and capital d the distortionsd the and costs of the ISI. emphasized They between develope

(2009):

reforms were advocated in order to increase efficiency.

101 inward

.”

71 - looking strategies was that the import of strategies import thatthe was looking - 14 Politik Trade interventions were rejected d and underdeveloped countries underdeveloped and d

- transit from the primary export model to model the export transit the primary fromthe Wirtschaft. Wirtschaft. 76 ed ISI made state governments more more governments state ISI made

ed ” , 25

its cause on negative terms of

Kohlhammer, 1987: 76

the of critique structuralists on 106;

” Franklyn A. Manu, A. Franklyn 74 What changed was the - term balance of

Journal of Journal

when when

CEU eTD Collection sector was limited in providing the long the providing in sector limited was disadvantage for technological advancement. industrial capital jobs. to Due its to generate failed distribution resources and allocation of inefficient and Thus, to corruption led ISI standards. quality required walls oligopolies remained inefficient manufactured and goods international lacked to tariff the order borrowingin financial to fund Due imports. onexternal dependent 84 83 82 81 80 79 78 77 salient to be forces and is economic deemed betweenpolitical The interplay historical context. Smith states that dependistas perceive de theory: rationale the of dependency the Smith explains 1.4 comparative advantage production the emphasize of products. primary specialization and comparative advantage i issuedofficials who import or investment licences permits proneto rent were seeking.

Ibid. Smith, import "Revisiting Colistete, Baer, 12 Ibid., Haggard, Bruton, 9f. periphery”, the from “Pathways Haggard, Dependency Theory

84 "Import Substitution and Industrialization in Latin Amercia”, in Latin Industrialization and "Import Substitution “The Underdevelopment of Development Literature”, Neoclassic particularly in its economic aspects economic its in particularly system international of the structure the as so much countries of particular characteristics “ the form that development has taken . "A reconsideration of import substitution", import of "A reconsideration

that it that is not internal insistence schoolits is dependency of the chief feature the Probably “Pathways from the periphery”, periphery”, the from “Pathways economists thatdeveloping argue countries need

substituting industrialization in Brazil”, 3 in industrialization -substituting was criticized 77 Furthermore, neoclassic economists argue that government

- 12 that is thevariable key to be studied in order to understand (…

- . awaited positionsawaited 81 ). Inward 15 velopment only in the frameofvelopment the in the only ” n output order to maximize and therefore

82 83 923

- Hence looking strategies were regarded -

26 intensive productionindustrial the intensive , the, potential disregard of any

80 102 .

to focus on product

global . 79 ISI ISI

as as

78 –

CEU eTD Collection SOCIAL ANTHROPOLOGY SOCIAL perspective." American Latin a period: neoliberal the leading sectors. Hence, aself subsidiaries since colonial profits corporationsthe of extract multinational control and theoristsDependency suggest performance. Rich countries became even richer at the expense of p the not endowmentsdetermine national did and economy international the elites on the exploitive system Short of division exploitive the of onthe elites labor. (ISubstitution Industrialization proponents critiques ofshaped neoclassic the conditions underwhich Import other and assumptionsPrebisch by These Southernthe hemisphere. poorer countries in trade deepens the gap b Structuralists development. thatinternationalimports economic elucidated not did effect The economy. Latin in elites America demanded sophisticated luxury goods, thosehence economic orderinternational new a Dependistas ofpostulated products. primary to volatility the due development - inward emphasis concepts, onan butput structuraliststhe developing 88 87 86 85 ar people theirthose own positive impactsfor elites, international system without their dependence the since basis power of local elite corporations. Tony time same Smith the points At out their dependence with Southern states live of cannot to power multinational the due economy of Import Substitution“, 16 Substitution“, Import of economy

Ibid., 29 Ibid., Smith, Franko, Kay Cristobal and Robert N. Gwynne. "Rel Gwynne. N. Robert and Cristobal Kay “The Underdevelopment of Development Literature”, Dependency theoristsDependency argue Both, dependency the structuralism theory opposed and prevailin the g

“The puzzle of Latin American economic development economic American Latin of puzzle “The . 88 Dependistas like Paul Baran highlight the dependence of local dependence the Dependistas of Baranhighlight Paul local like etween the rich and wealthy countries in the Northern and the the and countries Northern wealthy the in and rich etween the (2000): (2000): 85

. SI) that the that the expansion of manufacturing the sector is- neo

50 Power and politics Power and pillars the were of international the -

sustaining industrialization proc industrialization sustaining rose to the surface.

that the countries of the centre dictate the rules of evance of structuralist and dependency theories in the the in theories dependency and structuralist of evance INTERNATIONAL STUDIES INSOCIOLOGYINTERNATIONAL STUDIES AND 16

28 e not taken into considerations: ‘ not taken e

86 ”,

“The “The Hirschman, 56; that Southern states livecannot - termbenefits the are goal of s is contingent onthe ess is hardly possible hardly is ess

one’s economic one’s political political eriphery. directed A 87 . CEU eTD Collection power had no interest in sharing it sharing in interest no power had Those in class. upper for the privilege economic cemented elites international and local bonding glue social 89

Franko, “ Franko, The puzzle of Latin American economic development”, economic American Latin of puzzle The .’ 89

CEU eTD Collection (1984): 124 2.1 targeted economic growth, greater economic independence and self Hirschman South the and Brazil Following of analysis Korea. between ISIThe origins ofdiffer 2 92 91 90 toother onthe pursuehandcolonies and freetrade socio the - countries dictated European hand Onone the to ISI. countries adhered European the after time it rootslong countries took American Latin ISI ofin The advent 2.1.1 semiconsumer durablesand looking strategy lasted for atime frame of te characterised by growing manufacturing activities. The second phase of Brazil inward of 19 the end the of started ISI at industry. were imported formerly goods that to manufacture facilities domestic production establishing constraints Singer PrebischHans and Raul out ofur divisionbreak the of labo deliberate mostand as important ISI d production began and finally manufactured goods finally exports manufactured and production began took place Journal failures." of and successes Economic EducationAmerica: in Latin "Industrialization Baer, Werner . Haggard, “Pathway from the periphery”, 25 periphery”, the from “Pathway Haggard, 125 Ibid., Chapter

Case Study: ISI in Brazilin Case ISI Study: context Historical Brazil un Baer clarifies what ISI tried 91

after WWII after Brazil

–

derwent different stages of ISI, as Case Studies Case experienced different ISI motives: wars, foreign .

- - s good From onwards capital finished 1965 goods. , while Korea was confronted wit

based on based century

to achieve evelopment strategy 18

and lasted until 1955. This period can be can This until1955. lasted period and n years dominated was by and producing the declining terms of of paradigm declining trade the

in Brazil Hirschman described. Hirschman . After WWII Brazil wanted Brazil WWII to After . after WWII after economic structure ser - h external economic h external . exchange constraint 92

ISI consisted of consisted : ‘ISI

- The first stage stage first The sufficiency in their former former their .’ 90 ved ved

It It -

CEU eTD Collection took place at the the took at place ofend nineteenth the century. Brazil. in manufacturing its operations First (1889- Republic expenditure survived and income distribution investment, and accumulation diversification industrialization and could not occur while colonial patterns of production, capital was hindered after independence: “ thus noincentiveand had any to policy implement domestic power interests. Domestic elites were the beneficiaries of commodity exports 98 97 96 95 Press, 1970: 136 University New Oxford York: 94 93 wa Brazil of basis period . manufactured imported prices the for shipping increased fordangers goods sector benefitedmanufacturing from rubber the boom but capital and intermediate market size. entrepreneurship,ustrialization: ind infrastructure, a consequence Latin American countries lacked the prerequisites to launch policies werepolicies deemed to protect domestic manufacturing. However, and goods capital intermediate imports. Villela products countries Comparative Perspective, Edward Elgar ladder: development strategy in perspective historical The Economies A of industrialization" Argentina of view Brazilian and Brazil: bird’seye "A Villela. André Import Substitution and Industrialization in Latin America”, Latin in Industrialization and Substitution “Import Baer, 38f. Ibid., 38f. Ibid., Stanley America” Latin in Industrialization and Substitution “Import Baer,

sectors were not place in of WWI

Import however was Substitution Industrialization The colonial heritage of Latin America: essays on economic dependence in perspective in dependence economic on essays America: Latin of Stein and Barbara heritage Stein, colonial The

sector -

opened market niches for domestic producers in the non- the in domestic producers for niches market opened 93

before the before the depression.Great But for good demand manufactured too was Stanley and Latin whyin Stanleyand outline industrialization Stein Barbara America .

97 showed the limits the showed of s only The focus productiongoods onthe of Europe in military the and 1930) unplanned, market

, even though even , developed poorly Manufacturing activities -

(2011):40

. WWI . We can see how the economic growth of Latin Ame growth of Latin economic can see the how We Press, 2002: 14 Press, 2002: Anthem .

ISI ISI

19 due to the lack ofEuropean imports to lack the due from due to the absence of to absence shockthe due under supply

argues that exchange rate and monetary - driven ISI 95

functioning bureaucracy or bureaucracy necessaryfunctioning Villela states that already during the -

shift towards astructural change. As textiles andtextiles food products - the the , 95

95;

light industry has expanded expanded industrylight has Ha was implemented .” Joon Chang. Kicking away the Chang. -Joon not the beginni 94

98 durable consumer durable Nevertheless, the t he industrializedhe rica throughrica .

already ng of 96 The The . CEU eTD Collection (Singer foundations for strat industrial an rest on not did of time ISI the WWII and Brazil Republic decentralized powerful with and country patrimonial governorsa duri and destroy excess capacity in the coffee sector. I coffee economy. of the downs highlights thatwithouttariff protection‘ caused an apprec on dependent coffee export Simultaneously, success revenues. the of export the sector 107 106 105 104 103 102 101 100 99 “ demanded Haggard a effectively as ISI that argues 2.1.2 policy industrial conscious growth. economic oriented development trajectory and replaced coffee exportsthe aspillar of main of the proclamation Novo. the Estado in authoritarian president of Republic.the the power 1937 Until consolidated central was and culminated

Villela, "A bird’s eye view of Brazilian industrialization", 38f. industrialization", of view Brazilian bird’seye "A Villela,

Ibid., 172 Ibid., Ibid., “Pathways Haggard, 44 Ibid., 44 industrialization", of view Brazilian bird’s eye "A Villela, Ibid.163 periphery the from “Pathways Haggard, 44 Ibid., ISI ISI - 165f. government to purchase government the determined trade of terms the in The sharp decline Prebisch Thesis) not did emerge before 1950s. the

implementation

strategic action by the state the action by strategic .

subsequent interventions. government 102 103 Villela argues Villela thatfrom 1930s the followed Brazil onward an- inward iation madeiation and importsof currency the cheaper. from the periphery the from He .’ 104 ’ 100

also notes resort thatthe to ISI 30s the not in was ‘ Haggard agrees with Villela that during the Great Depression

“, 161 “, 165 .” 107

ISI in Brazil in the 1930s ISIBrazil answer was an to in

industry would continue to be held hostage by the up and strategy 20

that is on based that

105 101 n 1930 Getúlio Vargas became

Haggard s Haggard 106 egy, but that it laid the the laid it that but egy, Structural challenges a theoretical rationale hows thatBrazil was 99 Thus, Villela Thus, Villela ng the First the ng the result of the of result

CEU eTD Collection 172. enforced. enterprises became more important and policies to attract foreign capital were state and Planning goals. goods capital substitution as next and intermediate for target importwere substitution. Thus, spent on intermediate and capital goods and protective measures were implemented. experiment of import From liberalization. 1947onward . ISI emerged by General Enrico Gaspar Dutra clientelistic networks and weak political alliances re to long Due the administration Dutra the ( During external 116 115 114 113 112 111 110 109 108 goods, capital were cover. not boundtoforeign firms, exchange internalized which and were auctions substitutedfor licenses Foreignexchange institutional import policies. continuity. of role investment foreigndirect promoted funding ISI crucial the external and to receive and entrenched in the bureaucratic apparatus. ‘ an had products state

Villela, "A bird’s eye view of Brazilian industrialization", 48f. industrialization", of view Brazilian bird’s eye "A Villela, 162 Ibid., 162 Ibid., 162 Ibid., Ibid., 171f. periphery the from “Pathways Haggard, Ibid., 47f. industrialization", of view Brazilian bird’seye "A Villela, 26 Ibid.,

108

51 In the 1950s when light in According to ISAccording Villela intellectual rationale’ . shocks 111

112

115

According to Haggard, Brazil’s shift towards the secondary Brazil’s towards shift the to Haggard, According phase of ISI

- led industrialization pursued.was industrialization led

- in form of alackof of form foreignin exchange term benefits of manufactur . 113 The The

I 1950s duringthe was furthered monetary by and structuralist 1946-

dustry reachedhigh had output levels “, 174

51) s 21 tate authorities envisaged consumer durables,

ed goods and the price volatility of primary volatility price the and goods ed foreign exchange reserves were

114 approach was pursed was many by politiciansapproach 110 The possibility to exportcommodities, With the reintroduction the of With democracy

Pathways from the periphery the from “Pathways Haggard, . scarce foreign exchange was only

Thus,

Haggard Haggard labels it ‘natural’ ,

new sectors

lost lost - owned by by

also also

an “, 109 116 -

CEU eTD Collection Plans) under the incumbency of president JuscelinoKubitschek.Plans) incumbency under the cooperation. approached the task. it way which integrated of the in substitution because ofimport evolution the Brazilian in milestone of scope the government: the ‘Targets ‘ Program’ expanded projects Theestablished. initial idea of the commission was to re Bank(BNDE) National the Development were Commission subsequently and the institutional theBrazil Joint level - profit remittanc that This meant 122 121 120 119 118 117 the growth- the thus and of economy the cheap credits. As aconsequence the Medici ‘miracle’.economic It was through private achieved sector involvement and by granting Brazilian drivers the of were the constructionthe industry consumer durablesand 1968- the introduced coup PAEG (Planode doGoverno)Acao Ecomomica Plan. Between that argues FDI. Haggard foreignborrowing was at amuch higher level. opened doors the approach forpolicy Dependency theorists thatthis liberalization. claim inflation gave differea exemplifying ahigher degree of self 1950s the goods. dropped during capital Imports even and substitute durables consumer industrialization", of view Brazilian bird’s eye "A Villela, Villela, "A bird’s eye view of Brazilian industrialization", of view Brazilian bird’s eye "A Villela, periphery the from “Pathways Haggard, industrialization", of view Brazilian bird’s eye "A Villela, periphery the from “Pathways Haggard, periphery the from “Pathways Haggard,

‘Brazilian Miracle’ rested- onoutward 1973 Brazil experienced its ‘miracle’ with high GDP growth rates. Demand for After the military the After .

Finally,

Nevertheless ’ deteriorating 119 Villela cla nt impression of the consequences ofnt ISI impression consequences the . adoption of , coup in 1964 the financial markets experienced a period of

these projects were the basis for planning models (Target

relations betweenthe countries two ims that ISI ims that es of TNCs received preferential exchange rates.

“, 180f. “, 174 “, 175 - sufficiency. Nonetheless, foreignindebtednesssufficiency. and cum

- 22 debtstrategy was implemented.

- government could not avoid an an government not avoid could

United States Economic Development

oriented policies, but i due to investmentdue to initiatives

48 49f. 48f.

ceive fundingforceive development The Kubitschek regime was was regime Kubitschek The a

118 Theof realization the

put an to the end mport restric

120 121 -

The military

122 was able to overheating Moreover Moreover 117 On On tion ,

CEU eTD Collection ISI. On the one hand the above the ISI. hand Onone the the in and 1980s. accomplished was processindustrialization capital and intermediate from especially exports goods, commodity and towards industrial uponimports. contingent still highly were sectors that underdeveloped i providing incentives like tax continued. The state encouraged state 126 125 124 123 growth interest to Brazil fluctuating rates. exposed The sharplyand foreign borrowingincreased th exchange rates. c Lower quality and overpriced and products to the Lower quality were consumers.detriment of local goods. produced competitivenessof the domestically the tariff rates thathampered not did Brazil import goods for domestic consumption offset was the by high nominal deficiencies of ISI were specifically apparent in the 1980s. comparative advantage of disruptions. toandscales which allocation led economic The nto force. Brazil intended to finish its ISI process due to investments in those in to investments due ISI to process finish its nto intended Brazil force. urrent

e other hand macro and microeconomic deficiencies. and macro other microeconomic In hand e course the of II the PND ibid.52f. 58 Ibid., industrialization", of view Brazilian bird’seye "A Villela, periphery the from “Pathways Haggard, - - goods, implemented midtowas the in late 1970s. In December 1974 the Second National Development Plan (II PND) entered cum account deficit. Microeconomic shortcomings deficit. Microeconomic account the included disregard of

- debt strategy had severe impli 123

- exemptions, suspendedexemptions, controls credit or favourable - mentioned structural change structural industrialmentioned and change ongrowth,

“, 180f. - owned owned enterprises foreign borrowingby to

23 cations cations for decades - next the

50f.

124 The fact that by the late 1980s Villela suggests that Brazil’s 125 He explores both explores sides He of

The shift away away shift The

i nflation and and nflation 126

CEU eTD Collection social facilitat produc Korea powerformer Japan colonial role the , of the United States can onlySouth Korea’sISI implementation be analysed in the context of the legacy of its 2.2.1 2.2 135 134 133 132 131 130 129 128 127 politicians controlled powerful and independent bureaucr hence a 1948in with statea apparatus by marked Japanese notions. followed,led, rather than industrial development “ colony: a just more than was invaded former1937. in Japan supplier Manchuria when rural area and enabled industrial expansion. Korea gained even more importance as the same relevance period for materials sectorraw export. and traditional the food for products labour development." development." periphery the from “Pathways Haggard,

Ibid., Ibid., Ibid., ibid.197 ibid.194 Ibid., 34 Ibid., periphery the from “Pathways Haggard, Kay Cristóbal. "WhyEastAsia overtook LatinAmerica: agrarian reform, industrialisation and

ISI in Korea in ISI Study: Case -

Historical Context Historical political structure.political , which emphasized tion took the first steps in the world economy via export primary products exportprimary via (PPE) economy world took firstthe the in steps ed Korea’sed . agricultural exploitation 164 51 51f. was dominated by Japan’s military crucial pillar development of Korean the Haggardpath.

)

Third World Quarterly World Third . T period interwar during the . 130 In this sense this In 127

Korea was under Japanese rule fro raw material productionraw infrastructural and investment with

23, no.1079 6(2002): As a result of a unique conception of empire, state of empire, conception unique of a result As a

“,

“, 51 Korea became supplier of Ja became Korea 24

.” 24 133 hus 132 - strategic understa of nding the division of Therefore, Therefore,

Nevertheless, , acies inherited from the colonial period colonial the from inherited acies

Japan established property rights in the the in establishedproperty rights Japan 131 Korea Korea

Railroads, harbors and roads harbors roads and Railroads, and with the reference to t Haggard argues that Korea 134 m Political institutions are gained its independence gained

1910 to 1945. panese’ foodstuff panese’ (rice argues: ‘ 129 - directed investment investment directed Postindepen Korea’s .’ 128 135 South South

PPE PPE den he he ce -

CEU eTD Collection increased its power structure. Under these circumstances land solid asbasis a functioned for state by nearly 60 per cent. trade era industrial and employment Manufacturing droppedcolonial output decreased. 75 per cent of the industrial capacity was de War Korean the Island. the During of part industry Northern locatedthe in was heavy 141 140 139 138 137 136 C state the sophisticated MilitaryGovernment (AMG)further American assistancemore or onexternal less dependent StatesThe United financial provided resources for Korea´s ISI payments difficulties, political separation and thus the access to important markets. 2.2.2 structure was centralistic was rather clientelistic in its exchange between state and the people South Korea’sfor development impact explaining long and but institutionalfactors accumulation as sourcefunctioned of capital Unite the supportfrom financial The Korea. of path South development structural were inherited the importantJapan conditionsdetermining in from strategies under authoritarian Journal rule." of International Relations Development and onstitutional weakened amendments the power of t

Ibid., 34 Ibid., periphery the from “Pathways Haggard, Ibid., Vieira, periphery the from “Pathways Haggard, Vinícius ISI ISI 7, 25 After WWII the industrial in bourgeoisie WWII South Korean lost itsAfter influence because Syngman Rhee took Rhee off Syngman pursedKorea import substitution ongrounds after WWII of balance of the with along of Statesform foreignaid in United supportthe fromFinancial "Invisible legacies” "Invisible

Rodrigues Vieira. "Invisible legacies: Brazil's and South Korea's shift from ISI towards export towards ISI shift from Korea's South and Brazil's legacies: "Invisible Vieira. Rodrigues implementation

137 , 15f. .

139 Nevertheless, Koreans relied on structural capacities

based on strong institutionalstrong foundations on in 1948based ice -

industrialization processes. industrialization led “, 51 “, 51f.

25 .

141 stroyed.

he legislationhe 136 With the end of the Japanese of end the the With - ranging trends. While trends. While ranging

. Thus, Korea Korea Thus, . period was reforms eliminated the reforms eliminated 138 (2013):

while the executive

are themain pillar 15f. ,

Korea’s

apparatus. d Statesd , which which , Brazil Brazil . state state The The 140

CEU eTD Collection fixed capital formation.fixed“ nearlyfinanced 70percent of totalequalled imports 75percent 1962and between of 1953and the total thus Haggard associated the generally low growth rates with e stagnating economy. Thestagnating industr Korea was allocated to higher degrees to cent on a yearly basis in the 1950s necessary impor imported grain import licences. Exchange rates regimes changed randomly. Rhee’s control over or credits, foreignexchange bank distributed support political Rhee retain In order to development str dominance 148 147 146 145 144 143 142 competition an was (MOR) program economic inconsistent the effort inflows aid to the political use maximize and of economic highly instrumentsa in resulted theeased pressure to conduct institutional reforms. positionKorea’s geopolitical sustained of flow the financial resources from U.S. the and overval at imports firms purchased . colonisation duringJapanese power

Ibid., 58 Ibid., periphery the from “Pathways Haggard, legacies” "Invisible Vieira, 55 Ibid., periphery the from “Pathways Haggard, legacies” "Invisible Vieira, 54f. Ibid., engthening Rhee’s incumbency was characterised by his bureaucratic authoritarian character.

of rural elites rural of

. with other ministries. other with

146 of of

allowed him to distribute resources to government officials to government resources himto distribute allowed attemp ts first duringthe of phase import substitution i the the 145 bureaucratic power t to implement a planning model, but model, planning a implement t to Kohli Kohli , ,

7 12 .

.’

142

148 Vieira highlights that US aid increased Korea’sGNP aidhighlights thatUS increased per 10 by The establishment of t

ial growthrates underISIial showed .

In contrast,

“, 58 “, A politicalA motivated ISI policy was ued exchange rates emphasizes that landlords had already lost political already thatlandlords had emphasizes 55 143

High government expenditures explain the the governmentHigh explain expenditures . 26

144 military expenditures rather th

Haggard states thatUS aid fundedthe

Peter Evans argues that US to foreign aid 147 Haggard notes: Haggard ‘

he Ministry of Reconstruction Ministryhe of Reconstruction and sold below average prices.

conomic performances in support faced and lacked : “ ndustrialization economic upturn, The

blamed for ablamed an economic an

combination of of combination . Domestic. Aid Aid

CEU eTD Collection durable consumer goods durable export State capacities were strengthened and the private sector lost support. The early phase of fragmented sectors operated jointly and enforced a centralizati The ofweakened. creation EconomicPlanning the Board (EPB) ensured thatpreviously of newcreation jobs and fostered of path the export sector and wages were kept at the same level. The absence of wage increases enabled the but uncontested, to over agricultural spilled the remained of government power the the changes and external constraints. Under Park Chung Hee the power of the executive 1961. corruption incoherence and political instruments enforced the ISIwas Rational shaped institutional context Korea. in result planning blocked as a of thusand of amount the investment. influence shapedUS implementation the of ISI but theproduction reflected limited of size the market balance and of payment difficulties. outweighed ortextiles consumer light goods, even though nega the agricultural and service sector. Korean firms were quite successful in sectors like 152 151 150 149 advance restrictions, quantitative imports: “excessive” to limit controls used of discretionary range wide liberalization became the major trade paradigm not: ‘ it. spawned strategythat economic underlying the

Ibid., 61f Ibid., 260 Ibid., 60 Ibid., periphery the from “Pathways Haggard, 150 - led growthwasled accompaniedhigh by tariffs onimport Haggard states: ‘ The shift to export promotion can be framed by inst framedby be can The shift promotion to export

light industrylight entrenchment The coup was a response not only to only short not response a was coup The 152 . Haggard analyses that it was not bef

Rhee and his government were ousted his were and government Rhee

149 “,

Due to Due its organizational lack ofautonomy any 58f. Political interests of the st ’

151 : imports of intermediate 27

allocations of US aid were reduced The neoclassical case generally overlooks a overlooks a generally case neoclassical The - led growth. Labourfurther growth. was led tive attributes related toISI related tive attributes term political instability-term to but on of decision- ate and specifically the - competing goods likecompeting itutional and political and itutional ore 1967 thatore import

goods increased, from office from making. making.

in in , CEU eTD Collection leadership Park powers of the and interests political particular the reflecting concludes: ‘ Haggard consolidated. Export potentials were evaluated and sectoral export targets determined establishment of Jointgovernmental the power Development Export Committee she the and (…) deposits import 154 153 155

Pathways from the periphery the from “Pathways Haggard, 66 Ibid., Ibid., 75 Ibid.,

Korea’s turn to exp to turn Korea’s

er administrativeof complexity importing

“, ort 70f led growth was “state growth was -led

led” not-led” only its in dirigisme in but .’ 155

.’ 153 With the With . 154

CEU eTD Collection reimbursements were invested in industrial capacities manufactured goods manufactured sector forKorea’s agricultural its purposes. oligarchy, of land further decline the shaped had tenants landlordswas and between structures. transformationof class discontinuity and One major difference between 3.1 3.1 3 162 161 160 159 158 157 156 latifundio minifundio. and between cleavages were large landho revenues. Nevertheless, the main beneficiaries of government investments A oligarchs but were co ofdiminished possiblelar influence patterns inherited from the colonial period the from inherited patterns opposite .Chapter griculture was not was neglectedgriculture duringISI to due its to foreign importance exchange 921f. substitution", import of reconsideration Bruton."A Pathways from the periphery the from “Pathways Haggard, 15 Ibid., 12 Ibid., 16 Ibid., 12 legacies”, "Invisible Vieira, 1080 America“, Latin overtook Asia East “Why Kay, .1 Conditionalities

Land reform Land

situation, with a strong network of clientilism and patronage in rural areas that the areas followed rural in patronage and strong networkof clientilism a with situation, T In Brazil t

laid the foundationfor the an laid of internal strong absence he landowners market of

and their control over large properties and subordinated peasants. subordinated and properties their controllarge over and - opted to the institutions: ‘ toopted the -

Comparative Analyses: Analyses: Comparative he agricultural sector was still divided between the powerful landed lders and not the common farmer. T ldersfarmer. and not common the

. Landowners received compensation for their land. These compensation their land. for received Landowners

Brazil and South Korea and Brazil .’

ge landowners government. onthe “, 160 no 35f

In this sense, Brazil, even after independence, was in a in was independence, even after Brazil, sense, this In

longer

162

In Brazil, however, small farmers were

158 of importance of

but at the same time Japan exploited . 159

Landlordsnot excluded were in the context of ISI ofwas context the in the herefore The land reform in Korea Korea in reform land The . 157 , Japanese colonialism

ISI exacerbated the 156 The dichotomy The dichotomy

and subsidies 161 n

CEU eTD Collection the landed oligarchs perpetuated their perpetuated oligarchs landed the Getúlio Vargas professional bureaucracy and fe remained. to author the refers of this beginning subchapter the At 3 ES an of ISI development amid further to the contributed consumption from exclusion ‘(…) market internal of an expansion prohibitedthe landowners the strong of position Commercial neglected and ‘ 171 170 169 168 167 166 165 164 163 era. The strong position powerful and oforiginated landowners oligarchstradition since and large landowners it. dominated without possessions. people Korean control the over case of Brazil the Portuguese established their colonies, in Korea the Japanese exercised structural the historyfounda shaped colonial Inramifications. both countries period durationof the ISI the institutions influenced organisations and action for capacities different create structures to society. relations and structured their in internal They vary dramatically .

1. Ibid. Ibid. 11 Ibid., 2f. legacies”, "Invisible Vieira, 11 Autonomy“, „Embedded Evans, Peter 22 Ibid., 16 legacies”, "Invisible Vieira, periphery the from “Pathways Haggard, 37 Ibid., 2

Bureaucracy

In landowners Brazil were already powerful and dominated thosewere who Vieira clearly states that the social political structure of both countries

169

The revolution of 1930 did not Thedid oflead revolution to 1930 changes the in any authoritarian agricultural interests ISI the dominated period. ISI contributed to extensive rural poverty and a skewed distribution aof distribution income skewed poverty and to rural extensive ISI contributed

In 1822 Brazil itsIn gained 1822 independence but the weak state structure

. 168

“,

.”

overtook Latin America“, 1093 America“, overtookLatin Asia East “Why Kay, 36; influence 167

deral administration was introduced, butderal administrationintroduced, was and limited autonomous state actions and autonomous limited

Peter Evans: 164 170 in Vieira points out Vieira With the incumbency of incumbency the With

the Portuguesethe colonial

Different kindsof state

“ States are not not generic. are States tions. In the tions. .‘ 166

that the the that and

, thus,, .’ 165 . its its 163 171 :

CEU eTD Collection fostered rent fostered clientelistic system that policies a better coordination between state actors while less reg industrialization despite negative external and internal appearances. Coherence implies to was selective in its strategy. Latin American countries have pursued the same policies of has industr it.Southrequire Korea specific in production only favoured Flexibilityless to means adjust one’s regulation. program if the policy circumstances characterized the development path of South flexibility, Korea: selectivity, coherence and effectiveness of state intervention. Jenkins notes thatsuccessful to depends a industrialization large extent onthe Vieira states: 175 174 173 172 Korea’sstrongOnly bureaucratic legacy made it possible t strengthened coherence. interpersonalbureaucracy networksthe and within chosen structure social combines autonomy bureaucraticinsulationWeberian ‘ with elementsinherited of embedded autonomy due to Japanese colonial period. Embedded ISI period ISI promotion meritocratic and its autonomy statethe regained

Ibid., 154 Ibid., Evans, industrialization”, of economy political "The Jenkins. 10 legacies”, "Invisible Vieira, . .” (…) purposes for arena private public of the use the broadly, areof the these (…) roots the Brazil in public arenas and private the between boundary unclear an led rule indirect such Therefore, settled. were they where neighbourhoods “ During ISI the period Korea’s 173 “The State as a Problem and Solution”, and Problem a as State “The They worked on behalf of the Portuguese crown and acted as de facto rulers in their in rulers facto de as acted and crown Portuguese the of behalf on They worked

, as Evans points as, Evans out: “ - .’ seeking activities and made the state more predatory then developmental. 174 policy initiatives were rooted in coherent bureaucratic organization and Civil service examination guaranteed that the best candidates were effected

recruitment Rhee Without a deep, thoroughly elaborated, bureaucratic tradition,

He refers tofour key factors/conditions ’s dependence on ’s dependence c private

154 31

procedures as well

200

ulation standsulation market hat underParkhat 172 after the distortions of the the of after distortions the

immersion in the surrounding . Evans claims that ISI apital establishedapital a ial sectors, thus thus sectors, ial

patrimonialism ’s ’s incumbency - oriented

that that 175 –

CEU eTD Collection embedded autonomy. embedded partial Brazil industry. Thus, thrivingautomobile a labels Evans (GEIA) induced subsidies Industria and para capacity Automobilistica Planning Grupo the by Executivo was coherent forabused personalenrichment. role of the rural elites fostered clientelistic networks. expansion industry in Brazil with price distortions and higher production costs. distortions higher and price with Brazil industry in a modern statedevelop but its apparatus, employment. The strategy of ‘pocket of efficiency’ political leadership fluctuating civil encouraged and servants on to capitalize their short Appointments in Brazil’s bureaucracy were based on patronage rather than competence not disentanglecould the ties entrepreneurship. to private private capital, which was one main characteristic of Rhee’s regime. Nonethe Park the neither 181 180 179 178 177 176 particularistic predation pushing at the limit to which embeddedness can be co policy making apparatus would have been possible Kholi and states: and Kholi ‘

Evans, industrialization”, of economy political "The Jenkins. 158 Ibid., 156 Ibid., Evans, The bureaucracy of Latin American countries was highly politicized Problem and Solution”, and “The State as Problem a Solution”, and Problem a as State “The

of of state capacities. The character of Brazil’s embeddedness with i ,

regime’s reconstruction of bureaucratic career paths nor its organization of the economic economic of the organization norits paths career of bureaucratic reconstruction regime’s industrialization economic growth and Insofar as the Brazilian state lacks cohesiveness, it might be classified as classified thelacks be might as cohesiveness, it state Brazilian Insofar a .” 178 180 The implementation of IS implementation The mobile establishmentmobile auto of an contrast, the Baer connects In

Evans states that in those sectors where bureaucracy

166f. 156 32 . “

176 incrementalism an implied uncoordinated

ncentrated in without ties few in a ncentrated

204 Park Park

I exceeded the limit.

– aimed to stop onaimed dependence the a step by step - Public in the ISI the in phas 177 Evans points Evans out: “ - private interactions were

181

was supposed to Vieira refers to to refers Vieira

degenerating intodegenerating e

ts dominant ts dominant took place. took place. less, Park Park less, Korea is is Korea . 179

CEU eTD Collection successful reasons the earlier Jenkins forpath: explains Korea’s development contingent upon ISI. Therefore, the state was constraint in its leeway. itspursued own its to trying interests, maximize benefits. own the skills to observe did and not possess inexperienced staffs administrative were The seeking. prone to rent In g Brazil that the pursuit of the import of pursuit that the the multi fragmented 189 188 187 186 185 184 183 182 ISI. Korea enabled autonomy to switchto exports return then and to second the of stage South Korea. with more autonomyable was to enhancedisplayed and its up able exports was to catch and programs without the interference of local classes. Under military rule the Brazilian state He reiterates that this is only possible when state authorities can implement their cohesive capitalist state 923 substitution." import of reconsideration "A J. Henry Bruton, Ibid., 216 Ibid., Ibid.,216 “ Jenkins, 269 periphery”, the from “Pathways Haggard. 25f. legacies”, "Invisible Vieira, 9 Ibid. 9 legacies”, "Invisible Vieira, 189 The The by capitalist development at pa required whichis direction the process in to accumulation state the of the direct ability the rather export of superiority “ In institutions old Brazil new within organisations prolonged The position weak of the industrial bourgeoisie strongand patterns of state

The key to the superior industrial performance of East Asian NICs do of East NICs Asian performance industrial keyThe superior to the

The political economy of industrialization”, economy The political industrial bourgeoisie overnment officials who issued import licences or investment permits were issuedlicences or who were investment import permits officials overnment class state -class 188

and implementand programs and Itplans. that seemed the government . .’ 183 182 -

orientated industrialization strategies over import substitution,(…) It is It is substitution,(…) import over strategies industrialization orientated

In contrast, Korea is classifi

of Latin American countries traces its origin to back the rticular points timewhich in is crucial.” - substituting proce

224

Journal of economic literature of economic Journal ss generated interests that were ed as embedded autonomy, as a as embedded ed 184

187 186 es not lie ingenerales lie the not

185 Haggard notes Haggard

36, no. 2 (1998): 36, no. 2(1998): CEU eTD Collection intertwined. this research lies on economic development, but political and economic development are Thus oppositionwith liberalization. towards import and economic growth, economic and perspectives.Ontwo the hand, one if the regime 3. The military regime in openness of twentieth the Thus, century. beginning protectionism supported was and 196 195 194 193 192 191 190 of stage second transition thatthe argues towards import inflati high thatperiodsargues of emergence of an authoritarian rule and underwent different political arrangement. He was suppressed and authoritarian pattern s suppressedwas authoritarian and link later stages of ISI with the emergence of authoritarianism. capital and the incre rise of the bureaucratic

1. Ibid., 257 Ibid., Haggard Vieira, Ibid., Haggard “ Jenkins, Ibid., 209, 217 3 ,

Regime t Regime the author also considers the affect of ISI on political development. The focus of development. political ofon ISI affect the alsoconsiders author the

257 The link between regime type and economic development can be analysed from Haggard argues that i "Invisible legacies”, 21 legacies”, "Invisible

, “Pathways from the periphery”, the from “Pathways , periphery”, the from “Pathways , was opposed. The transition to export transition to The opposed. was

The political economy of industrialization”, economy The political 192

yp ISI wasinitiated before the military coup of e

asing social tensions within the country. tensions social the asing within

- and on the other ifthestrategy affects achange of regime type. Brazil (1964) enjoyed more butalsoconfronted was (1964)enjoyed autonomy Brazil authoritarian (BA)

n Brazil the strategy of ISI had

on in general cause political polarization. political general cause on in

257 254f.

substitution of capital goods contributed of capital tosubstitution the

34 regime in 1964dueto its close ties to foreign

entrenched.

191

220

- led growth started in the late 1960s. growth late started in the led

type determines the chosen strategy 196 the Critiqueshighlight thatthe 194 1964 Evans and O’Donnell also O’Donnell and Evans 195

no direct link with link no direct the As a consequence labor consequencelabor As a and and denyany causality 193 Vieira trade trade 190

CEU eTD Collection prolonged. r. control of labo and the pressure to enhance competitiveness was acco political regime type is more wage pressure. goods consolidated further capital for Thedemand strong market. adequate establish an substitution Thus, durables. of consumer income unequalwas distributed in order to with 202 201 200 199 198 197 import after pursuing export promotion stillproducers force in . were path baseddevelopment was onISI. Moreover, protectionist measuresdomestic for import to wrong leads substituting industrialization interpretations, Korea’s since ex to the to shift but accomplished walls industrialisedprotective Brazil, behind like South Korea, 3. market access rather then lower wages. foster authoritarianismsince manufacturing multinationals were primarily interested i

1. Jenkins, “ Jenkins, Ibid., Ibid., 254f. 258 Ibid., Haggard, 258 Ibid., 4

substituting industries would be tailored to essent tailored be would industries -substituting authoritarian ruleauthoritarian and control. labor Shift towards EOI towards Shift .3 According to Haggard theAccording between association industrialthe approach and Haggard highlightsHaggard temporaryof the ISI: character ‘ export between dichotomy postulating a Jenkins that Rhys argues points out that Haggard

port exports of manufactured

The political economy of industrialization”, economy The political “Pathways from the periphery”, the from “Pathways 200

198

Thus, support authoritarianThus, diminishedand rule policies for democratic

reasonable

the needthe to attract foreign duringISI capital did not

257 at an earlier stage. 199

in South The shiftKorea. to export 35 197

The second stage of The stage second ISI rested on the

199 ial development purposes and ultimately phased

201 mpanied th by

Ideally, the protection granted to 202

e exclusione and - oriented andoriented - led growthled n CEU eTD Collection internal competition failed has to detriment develop, of production.’ efficient the to of form healthy a restrictions, and duties excessive by tariff protection to owing the afforded and of scale, closed Prebisch himself by ‘ gaveup: gap. that overvaluedexchange rates prohibitedexports thus and led to foreigna exchange question if it is necessary toexport toshift timely RaulPre ofThe O.Hirschman and critique Albert export the states that persisted protection levels of high fact, In status. to competitive to graduate firms allowing out, 209 208 207 206 205 204 203 increase to it difficult productionmake bring cost efficiency production international levels.” of to and forshow value domestic the added producer tariffs traded international goods.effective ofIn and protected contrast, level price the ectiveeff tariffs have to distinguished. be Nominal tariffs show the difference between and Nominal tax. a collecting by imports limit to instrument most the common are integration. regional countriesdeveloped and exceeded nominal rates indicated by the nominal tariff. In many Latin American countries effective tariff rates low a or tariff only onimported inputs of margin valued the added isthan larger

Ibid., 104 Ibid., 104 America”, inLatin Industrialization and Substitution "Import Baer, PeterWorld JBurnell. inThird the Economic nationalism Franko,” Import of Economy Political Hirschman,“The Ibid. 219 Haggard, 206 market has deprived Latin American countries of the advantages of specialization and economics and of specialization advantages of the countries American Latin deprived has market Peter Developing countries draw on different tools to protect their economy. Tariffs their economy. ondifferentto countries protect draw tools Developing The puzzle of Latin American economic development economic American Latin of puzzle The

“Pathways from the periphery”, the from “Pathways Burnell

- expounds bias of ISI itsbias and debt . 208 Baer states: ofprotection effective levels high Such

As is well known, the proliferation of industries of every in thea of industries known, kind well As is proliferation that Prebisch

Substitution“, -Substitution“, 36 -

207 intensiveness led to servicing. debt led intensiveness advocated for preferential market access to s achieved by protection. Since there .

London: Wheatsheaf, 1986: 67 1986: Wheatsheaf, London:

- 2 oriented growth models. In 1963 growthmodels. oriented bisch show the relevance of the

”, 67

205 Prebisch analysed

eliminate incentive to to incentive eliminate

204 .’

203

is no no is

He He 209

CEU eTD Collection Mexiko." Mexiko." affect ISI? Natural resource export is amean to prolong ISI. prevent local producersprevent care of to take higher standards of production processes Tariff walls standards products. quality for higher demands productionthe process and through ex participating facilitate the establishment enterprises. industrial Hirschman of new says that limitations for economicgrowth. The balance of payments deficit will be reduced and countries. elucidates whyexportin exp for successful to be theprerequisite even beena in home considered commodity market has of manufactured a acceptance com as percent 254 was adds: He 215 214 213 212 211 210 failures. possible product standardsany to compensate quality and analyse pro policy reforms are implemented. Heinrich clearly states thatISI is alternative no to the foundation for exportpromotion. Thus ISIfostereconomic development can if right the government import, without any export horizon on the part of either the industriali shift exports: ‘ towards encouraging analyses why governments in Latin American countries were Import "Die Andreas. Heinrich, Haggard, 25 Ibid., import of economy political "The O. Albert Hirschman, of import economy political "The Hirschman, 24 footnote 115, Ibid., motion of exports. Products have to be first consumed domestically first to consumeddomestically be orderin to Productshave motion of exports. How does the comparative advantage of resource does comparativeadvantage the How Hirschman states isprerequisite for thatISI a export Wirtschaft undGesellschaft Wirtschaft

.’

“ “Pathways from the periphery”, the from “Pathways 214 It has been estimated that effective protection for manufactured products in Brazil in 1966 in Brazil in products manufactured for protection effective that estimated been It has Through exports smaller domestic consumer markets do not pose any not markets do smaller domestic consumer Through exports

orting .’ pared with product protection of 99 percent of 99 protection product with pared

211 Andreas argues Heinrich the in direction same regards and ISI as ports in global markets requires countries to be more efficient in efficient portsrequires countries more marketsto be global in g industrialg processed products for is developing crucial - WuG substitution als Entwicklungsstrategie in Lateinamerika. Das Fallbeispiel Fallbeispiel Das in Lateinamerika. Entwicklungsstrategie als substitution

24, no.24, 102 1(1998): The new industries have been set up exclusively to substitute to set upsubstitute exclusively been have industries new The

substituting industrialization”, 25 industrialization”, -substituting 37

substituting industrialization 24 industrialization -substituting

. “ - 210 rich countriesrich commodities in 215

led growth: ‘ growth: led not supporting a timely a supporting not sts themselves or the 212 Prior, successful

Hirschman Hirschman . 213 He He CEU eTD Collection the difficulties of ISI at an earlier stage and goods.capital Furthermore, reveal productionthe of smallermarkets intermediate ISI. Larger domestic markets enable t supportive ofwere ISI. resource sectorthus and state actors – sta rationale. He ofprolongation ISIif not it was economical even L. RosstheIn and further this Michael onresource endowment context, elaborates states thatISIHaggard like other policies distributional had effects onsocietal groups. a describes howHaggard factor endowment and of size the country the affect 222 221 220 219 218 217 216 consolidated.export promotion further hence South Korea’sexportstrategy responded to the composition of output, its industrial demandestablished the ed confin was by the growth rates of Brazil’s from benefiting upstreamthe sector coalition (ISIthe ISI 2) increased. ISI. of favour in were organisations – Brazil in of ISI.continuation organizedWhile labour Korea in suppr was dherence to ISI:dherence

Jenkins, "The political economy of industrialization”, 220f industrialization”, of economy political "The Jenkins, Ibid., 38 Ibid., Haggard Politics World Curse.” Resource the of Economy Political “The Ross. L. M. 34 Ibid. Haggard, strengthened 26, 39 country relies on commodity exports for the requisite foreig requisite for exports the commodity relieson country payment crises may plausibly be met by “deepening” import pressing. In large or large resource In pressing. of continuing import substitution is lower need and to generate nontraditonal The size of the domestic market influences and determines the length of time of determines and of influences market time length the The of size domestic the “ In relatively import small,

“Pathways from the periphery”, the from “Pathways “Pathways from the periphery”, the from “Pathways

manufactures and workers –

specific sectors, while lagged Brazil behind opponentsand against 219 When ISI extended its ISImeasures protective towards extended industries When in they had had strongerthey a basis to its due industrial longer history - substituting countries and in those with few resources the plausibility plausibility the resources few thosewith in and countries -substituting

rich economies, by contrast, external shocks and balance shocks and external contrast, by economies, -rich

38 30 he possibilityhe of of scale economics and therefore

222

221 38 benefited from the subsidies allocated in the in frombenefited subsidiesallocated the Once consumer Once been goods industrieshad

218 Labor seems tohave extended the n exchange n -substitution policies, while the

51 (January 1999): 311 51 (January .” tes thattoo non- many 216

220 domestic market.

essed, labour

exports more more exports -of 217 -

CEU eTD Collection Development 31f. 2002: Ashgate, planni points out thatPark suppressed businessman workersdelegated and industrial be characterised as weak state, while Park’s provides an example of astrong state. Felix import with substitutioncontinued market 230 229 228 227 226 225 224 223 development. countries. ‘ ISI: flexible in decision differ different with tasks approached The government 1970s. incentives as well as protection ignored.” interp neoclassical the that reforms institutional legal, and economic, by accompanied byindustrial South planning Haggard Korea. states industries, which would become export industries in the future. the in would become industries export which industries, substitution industrialization, inISI the was case, infant Korean subsequent aimed at raising

World World Asia compared." and America Latin industrialization: late and substitution "Import Felix. David Haggard, Vieira, Kim, substitution", import of reconsideration Bruton,"A Jenkins, Ibid.13f Haggard, While the first stage, import substitution industrialization (ISI), can be regarded as pure import ng tong technocrats. 225 - Junmo. Junmo. David FelixDavid outlines the strong Neoclassic theorists referred the more successful path of the East Asian NICs oriented policies. But the reference to market 223 "Invisible legacies”, 25 legacies”, "Invisible Korean government and the private sector government private the Korean and intertwined. and were cooperated

"The political economy of industrialization”, 216 industrialization”, of economy political "The 17, no.1459 9(1989): “Pathways from the periphery”, the from “Pathways periphery”, the from “Pathways 228 Market Therefore, Therefore, 229 The South KoreanEconomy: Towards New a Explanation of an Economic Miracle

- oriented policies were supplemented by s - making. 230 He underscoresHe thatnot marketdepreciation and liberalization Korea´s industrial policy was crucial for its success

226 In export South Korea - led

. 224 In this Jenkinsntext, thatSouth argues Korea co

13f. 15 in in

- weak state perspective. Rhee’s incumbency can

intermediate and and goodscapital inintermediate the early 39

924f.

: “( ’ the shift to shift …) the export led 227 State action was crucial in both ent strategies and proved to be to be proved and strategies ent growth was by supplemented - oriented policiesoriented disguises ector specific financial retation has generally has retation , Aldershot: , Aldershot: - growth was also also growth was

to to in in

CEU eTD Collection the beginning of the beginning the development: degree of income inequality. high the hitpoorest the considering of currencyhave ofpoor, the a would devaluation promotionExport was Brazil in .” Park under improvements crucial were the implementation less capricious and targeting of the exchange rate were the reasonforthe shift towards export strategies: “ 235 234 233 232 231 50s. an Furthermore, the of ISI distortions of outward an exports- to enable countries.the discrepancies differentnumbers and economic operating between political interregional hindered was cooperation successfully butlimited was to the due lack of competitive products. Regional The Brazilian BEFIEX (Special Fiscal Benefits for Exports) created export incentives pursuing export manufactured goods entering the markets the goods of entering countries. developed manufactured

Franko,” 1095 America”, Latin overtook Asia East “Why Kay, Franko,” Haggard, Ibid., 1459 why Latin America fell behind the East Asian NICs.” Asian East behind the fell America Latin why Korea´s growth rates increased in the 60s relative to the 50s by 4,7 per cent. At at an earlier stage to an export to shift failure the together ofexports with Thus neglect ofexchange. foreign the lack agricultural “ Moreover, rationale the of neoclassic the concept of countries developing Latin America’s industrialization was lack the lessof the capitalthan industrialization to Latin America’s keyThe obstacle The puzzle of Latin American economic development economic American Latin of puzzle The development economic American Latin of puzzle The “Pathways from the periphery”, the from “Pathways

235

- led growth did not want to anticipate the consequences of a bulk of bulk of a consequences the to anticipate not did want growth led

60s Korea depreciated its exchange rate and reduced taxes on oriented strategy. Thereby, Korea could reduce the existing by the obstruction the by of TNC subsidiaries, protected

further further 233 orientated industry (EOI) strategy are some of th some strategyare (EOI) industry -orientated Key analyses the role of exportseconomic for

12f. hampered due to unfavourable exchange rates. A

institutional development framework was was framework development institutional ”, ”, 234 66 66

232

231

e key reasons reasons e key Better Better CEU eTD Collection new evidence from Brazil and South Africa South and Brazil from evidence new gross domestic fixed capital formation capital gross fixed stem from domestic FDI by exemplifying that in the timeframe of 1953to 21,2 per1960 cent of Brazil’s whole i forgovernment’s shifted demand towards capital recourse the to foreign joint actions againstinvestment. foreign In after Brazil the military coup in 1964 export Korea During ISI the period 3. parameters that fostered achange in the development strategy. in existence. The Bankof Korea or R&D establishments agriculture in were further 241 240 239 238 237 236 the military coup in 1964. firms. toforeign treatment favourable to provision the goods affiliated of was intermediate consumer durablesand of FDI. role the limited points out by 1973 commercial loans became the main source of external capital and limits of local investors terms in of capital and technology. Nevertheless, as Haggard the domesticgrowth since savings not did reach substantial levels. capital nstitutional links to the domestic private nstitutional links to domestic the

1. Vieira, Vieira, 213 Ibid., 194 Ibid., growth?: hurt strategy industrialization substitution import “Does Adewale, R. Aregbeshola 191f., Ibid., Haggard, Bruton,

secondary of phase ISI to rely had on input the of foreignfirms. This to due was the 5

Foreign Direct Investment Direct Foreign aid. Korea also remained a borrower duringexport a formalsoremained came the in Korea of aid. Vieira highlightsVieira dominant the Fo by reign played role Direct Investment in Brazil Foreign investment during the second stage of ISI in Brazil was accelerated after "Invisible legacies”, 25f. legacies”, "Invisible "A reconsideration of import substitution", import of "A reconsideration

“Pathways from the periphery”, the from “Pathways - led growth fostered the establishment of local firms. Brazil with its shift its to with firms.Brazil of growthfostered local led establishment the Korea did not rely on foreign direct investment direct onforeign not did rely Korea 238 242 240 In Korea closer ties between business fostered labour and Incloser ties Korea between As a consequencestateAs a elites, local capital and foreign

” In” African Asian and Studies

196

sector were less intensive. 41

921f.

. 241

, 17, no, 17,296 3(2012):

236 237

Haggard shows thatin Haggard 239 The substitution of of The substitution

capital since since capital its external - owned owned - led led

CEU eTD Collection at UCLAat (March post the in learning technological Princeton University Press, 1979: 74 in which multinationals come to play an expanded role the walls of TNC subsidiaries. TNC of walls the entered domestic markets, while in Brazil technological development took place behind In contrast, appli South Korea centre the in measure substantial in to remain continued ownership whose production of industrial system partof an integrated the peripherybecame of commodities, exchange coalition.” Haggard claims: among those partners with negative those partnersamong consequences negative with for firms forged an alliance. Dependistas clearly emphasized the dominant role of TNCs 246 245 244 243 242 TNCs importwhen controlled period time the with intervention military associated Moreover, O’Donnell Guillermo of foreigninfluence investment, strengthened referring to Peter Evans, that the second stage of ISI, wh by Thus,argues, ofclass Brazil. popular in the choices to Haggard suppress policy the dependent development, is called sector.triedof which popular strategy, urban This the Brazil’s mainpillar until 1979. signifi content technological focus oncapital The oninequality. development of dependent consequences the scholars focused on rare, and thus and rare, bulk the of workers unskilled wereThe neglected. consumption of

Pathways from the periphery”, 16f. periphery”, the from “Pathways Haggard, import "Revisiting Colistete. P. Renato Jenkins, Dependent Evans. Development:Peter Alliance of Multinational, State and Local Capital in Brazil, Jenkins, The dominance of TNCs at the second stage of stage second ISI the at of TNCsThe dominance "The political economy of indust of economy political "The 222f. industrialization”, of economy political "The Evans argues that ‘

2009)

- intensive favoured manufacturing - high “ The strategy of “dependent development” strategyThe of “dependent . 2009: 9

-war years." In Conference on Latin America, Globalization and Economic History cantly surged in the late 1970s. Primary exports remained

245 244 ed more restrictive measures and technological knowledge instead of being of being instead -

The exportof manufactured goods lowwith to medium substituting policies to largestex substituting the policies substituting industrialization in Brazil: Productivity growth and and growth Productivity in Brazil: industrialization -substituting rialization”, rialization”,

42 connected to the centre primarily inof the terms primarily centre connected to the

222f. resulted from a a from particul -resulted

a essentially the phase of import substitution of importsubstitution phase the -essentially uthoritarianism inequality. and

manoeuvres of the other actors ofmanoeuvres other the .’ skilled labor forces, which were 243

in Brazil was to the detriment ich was dominated the by ar transnational class tent. Dependency

Princeton, NJ: 246 .

CEU eTD Collection of means of the most people. the consumer beyond durableswas 248 247 TNCs of scope and the this is further beyond be thesis cannot investigated and TNCs policy was ISI induced Nevertheless, by classifying the operations of TNCsas intervening variable he shows th of ontechnologyalsoafterend ISI. the dependence that TNCs the prolonged

Pathways from the periphery”, p.16f. periphery”, the from “Pathways Haggard, Ibid. 16f.

. The question of bargaining power betweenhost power The. countries question of bargaining

247 Haggard highlights highlights Haggard 248

at at CEU eTD Collection throughout beginnings the of 1950s. the basismore 1950s. sophisticatedbeforethe industrial a outhad ofalready notto divisionwas introduced break the ofSouth Korea labour. The to to authorindustrial providesBrazil growthonly data 3 3 250 249 inevitably which of greatercontestability, situation to a Brazil’s to sector forced adopt acturing manuf was were under ISI in Brazil. sector. sector Baer shows through empiric data thatISI led to significant Brazil. in The manufacturing Source: Baer , percent in . .

2. 2 Villela, Baer,

Economic Development (…) having grown ‘too much’ under cover from foreign competition, foreign declining cover under from incrementally: much’ grown ‘too having ‘(…) Industrial growth increased its share "Import Substitution and Industrialization in Latin America in Latin Industrialization and "Import Substitution According to Villela, i The author refers to Villela "Invisible legacies”, 48f. legacies”, "Invisible

1968. Industrialization in Latin America” in Latin Industrialization and Substitution "Import 249 Thus, Thus, Villela argues that the industrial sector and its importance to GDP

of GDP grew in relation to agricultural the relation in grew industrial share of GDP he of GDP

ndustrial production on increased average by per 9 cent

who questionswho of sustainability the industrial growth percent in 1947 to from 28 percent in 19.8 economy the in 250

”, 99 since in South Korea ISI South in Korea since

, 99

CEU eTD Collection (…) 1970s ( fittest the only of survival the to led (…) 253 252 251 opportunities. industry in The employment could matchnever up to the high growth processThe industrialization to failed create large numbers of new employment 3.2 more flexibility its in structure. toneeds apply productive Baer areas. As aconsequence, the urban population grew faster than vacancies in the industry. income in Brazil. Moreover, many people migrated from therural areas tothe urban absor labor industry in ratherthe low was with correlation contribution of industry to GDP. The low Baer criticizes t of Brazil. employed manufacturingin in industries percentage people rose The sectors. different in employment population labour active This of to relates proportion the table Source: Baer ,

Baer, Baer, Ibid., 55 ibid., .2 .2 252

argues that if astate wants to achieve ahigher degree of social equality the state

Industrial employmentIndustrial a third of total output) was clearly ‘bloated’ and therefore untenable "Import Substitution and Industrialization in Latin America”, in Latin Industrialization and "Import Substitution 57

ption rates and high the ratiocapital/labor regional implied concentration of "Import Substitution and Industrialization in Latin America” Latin in Industrialization and Substitution "Import hat the proportion of labor force engaged with the manufacturing the with engaged force proportion labor of the hat

.’ 251 He adds that‘ He 45

the industrial sector at itsthe peak industrial in the late 253

102, 108

100

in a competitive a in

environment

CEU eTD Collection exports experience of Argentina and Brazil." and Argentina of experience exports possible size, an additional number of industries, all of larger size than could be accommodated previously, become contribute growth exacerbated the densitythe on labour market. Baer explainswhat further increasinglygrowing An rates sector urban of and industrial production. population 260 259 258 257 256 255 254 in Brazil skilled workers by the 1970s by the establishment of training systems. approach. 1970s number the of jobs increasedmanufacturing due t of creation was based on capital industries. supplier growth of domestic refers to production the linkage of inputs industry, for hence initial stimulating the increase could throughdomestic market backward forward linkages. and Once strong a development. industri conditions its capital higher prices and lower qualityimported the inputs. than lower prices and higher first of ISI linkage backward opposed stage against investment because of of fear the Franko, “ Franko, manufacturing the exports: to substitution import "From Thoumi. E. Francisco and Teitel Simon Haggard 241 periphery”, the from “Pathways Haggard, Ibid., of import economy political "The Hirschman, of import economy political "The Hirschman, Baer, .” "Industrialization Latin America: in successes and failures": 129 17; the manufacturing sector South in manufacturing Labour absorption the in Korea grew faster than Haggard underpins that high industrial output growt industrial output underpins thathigh Haggard The puzzle of Latin American economic development economic American Latin of puzzle The 256 . intensive technology. Little effort was made to adapt imported technology to local factor supply supply factor local technology to imported to adapt made effortwas Little technology. -intensive ” in context to the context in promotion of exportsector. the Pathways from the periphery”, 241 periphery”, the from , “Pathways 258 254 d to scarcity: job “ Thus, ISI was de was ISI Thus, Baer, “Import Substitution and industrialization in Latin America”, 98 America”, in Latin industrialization and Substitution “Import Baer, new jobs. Work was provided in the low the in provided jobs.was Work new Teitel and Thoumi and Teitel point out that Import Substitution Industrialization was s Industrialization Import Substitution - foster the intensive thus production and the ISI not did foster policies emed to generate jobs. One of the major reasons for the low employment impact of industry is is of industry impact employment low the for reasons One major of the

Economic Development and Cultural Change al bases had 255

substituting industrialization in Latin America”, 16 America”, inLatin industrialization -substituting 1 America", in Latin industrialization -substituting As As 46

Hirschma

Brazil managed to increase its supply of

But duringthe firms, emerged which - paid tertiary sector. In the 1960s and

“, 56 been established the establishedthe been n clarified: “

een as the engine of economic asengine the een 257

260

h in Brazil duringh in Brazil the 1950s Korea’s manufacturing was o the exportthe o

With increasing market increasing market With 259

34, no. 3 (1986):34, no.464 3

size ofsize the

Backward - oriented oriented 17;

CEU eTD Collection Rio de Janeiro: Institute for International Economics, 1986: 71 1986: Economics, International for Institute Janeiro: de Rio hierarchy. Koreans received training as industrial workersat different layers of management capacities labour failure of ISI tocreate employment and that high wages in the industry have prevented clear as a numbers this Baer interprets population. the number of growing the than This illustratesfor table demand labor thatthe s farmer former many absorption the enabled of cleavages class deconstruction of its with Korea in reform labor 265 264 263 262 261 Asia East ‘ states: between 1965 Source: Baer ,

Haggard, Haggard, Haggard, America”, Latin in Industrialization and Substitution “Import Baer, 1080 America”, Latin overtook Asia East “Why Kay, al. Bueno et M. Gerardo and Balassa Bela - intensive and thus unemployment decreases. unemployment thus and intensive - inten In the Korea In Latin America population growth places much greater strain on labour markets than in .’ .

265 “ “ Collective learning

Pathways from the periphery”, the from Pathways periphery”, the from Pathways "Import Substitution and Industrialization in Latin America” Latin in Industrialization and Substitution "Import The manufacturing sector was highly supported by the colonial The manufacturingsupported and colonial power the sector highly by was sive techniques of production.

- 1980 was 2.4 percent, while only 2.41.9 was while South in Korea. 1980 percent, percent in the labour the in

colonial le colonial

was tran

gacy of Japan amounts ofcapital left large human - intensive industry.intensive

241 241 Toward Renewed Economic Growth in Latin America in Latin Growth Economic Renewed Toward sferred to the following ge following sferred to the

47 263

n Brazil the population average growth in Latin American countries was smaller

261 262 Kay demonstrates

100 ,

100

neration.

that the land land the that Koreans also . Mexico City, City, Mexico . 264 Haggard Haggard

CEU eTD Collection Latin America.”Latin a time, the at countries quality thatthe argues of South in Korea labor “ labour market characterized by inequality. differentials between the manufacturing and the agricultural sector in Brazil created a a informal pointssector wagegrowing and aristocracy’, out that‘labour Haggard large numbersthehigher ofincreased exports,demand which the and differentials of This diminished. minimum wages to establishment the due was was highmanufacturing a - ISI of In first the years income. distribution the of analyse sectors to order in to refers Haggard 3.2 improved its skills construction in work due toAmerican assistance. 272 271 270 269 268 267 266 relative high prices for lower generally low. received s America conditions. more equal shaping farmers were neglected. This accentuat intensity over the long run. unequal income distribution:widening ‘

Reyes, “Latin American Economic Development”, 299f. periphery”, the from Pathways Haggard,“ 250 Ibid., periphery”, the from Pathways Haggard,“ 244 Ibid., Ibid. Bruton, .3 .3 Income distribution

Reyes and Sawyer argue argue business Sawyer Reyesthat industrialand and oligarchs in Latin groups benefited from protectionist the tools underISI. sector Private SOE firms and "A reconsideration of import substitution", import of "A reconsideration

ubsidies from the government and behind the tariff wall competition was competition wall tariff the behind and government the ubsidies from 272 267

Thus, owners factory made high profits consumers the while paid wage differentials between the manufacturing and other economic nd, in particular, unskilled particular, in nd, more labor was much effect ’ 270

paying sector Brazil in paying but the with of end the 1970s wage Subsidies were provided for large landowners, small landowners, for provided Subsidies large were - quality products: “ quality

271

236f. 241 es the importance of government interventions in ofinterventions government es importance the Protection, subsidies, and tax tax and subsidies, Protection,

48 269

922

Haggard em The vast majority are being made worse off while

was very different from that in other developing developing other in that from was different very phasizes the role the phasizes of state in for agricultural labour. a

ive than (…) in most of of most in (…) than ive increase capital and skill and capital increase 266 Hence, Bruton Hence, - scale 268

CEU eTD Collection (1978): 365 countryside and high inequality between the rural and the urban areas the ofpoverty (…) extensive levels in and Brazil high of inequality the in is factor persistence major rolecrucial of land the reform in South in Korea contrast to situation‘ the Brazil: in sectors less was pronounced. supply conditionsLatin American failed. to thedue capital of scales. producers prohibitedeconomic produced industrial domestically purchasing products. thus and concentration distribution most unfairfrom income prevented people semi of group intensive industrial firms: “ g the 282 281 280 279 278 277 276 275 274 273 - absorbing outward distribution. income of Korea’sequal further growthmodel improvement led contributedto an education. reform commitmentto the land and implemented and the Politics of Restructuring Politics the and

Ibid. 244f. Ibid. 227 periphery”, the from “Pathways Haggard, periphery”, the from “Pathways Haggard, Baer, Tuman Peter John Substitution "Import Ahmad. Jaleel periphery”, the 12 from Pathways Haggard,“ 300 Ibid., 299 Ibid., ains from this arrangement are concentrated are arrangement this from ains "Industrialization Latin America: in successes and failures", Income inequality limited limited inequality Income fordomestic number demand products high the and of The land reform,The land absence the of low distribution moreKorea’s income equal already duringISI was to due the

skilled workers -skilled 281 In contrast to Brazil - and John T. Morris. Morris. T. John and intensity of the emerging industries. of The adoption technology to looking strategy led to strategyled looking . ME Sharpe Inc, 1998: Inc, 7 Sharpe ME . . ” 274 The policy favoured the relatively well off at the expense of the larger larger of the expense the at off well relatively the favoured policy The 282 Thus, labor dualistic

—A Survey Economies of Policy Issues." Developing The Transforming the Latin American Automobile Industry: Union, Workers, Workers, Union, Industry: Automobile American Latin the Transforming

, South, Korea’s dispersion wage across industrial 236 227, 238

278

. ”

277 49

273

ISI solidified unequal income distribution unequal ISI solidified a

income income agricultural sectorthe and labor ISI fostered development the of capital more income egalitarian distribution

markets were the result.

276

128f. .’ 280

The shift towards export The towards shift

279 Haggard highlights the highlightsthe Haggard

16, no.16, 4 275 Income Income One One

in in - - - CEU eTD Collection of foreign technology to local standards. ofincorporation foreign technology the and strongcohesion of social human government, capital, accumulation poverty peasantry. of the back the on economic achieved successwas South that Korea’s phenomenal argued be could Korea 286 285 284 283 workforce

Bruton, "A reconsideration of import substitution", import of "A reconsideration Bruton, 1081 America”, Latin overtook Asia East "Why Cristóbal, Vieira, “Pathways Haggard, . 283 According to Bruton,According Korea "Invisible legacies "Invisible ” Nevert after shifting towards an open economy dueto its economy open initial conditions,after an shifting towards like 285

and thus some form of exploitation took place. took of form exploitation some thusand

heless from the periphery”, the from ,

”, 16 peasants who migratedpeasants who to urban areas

13 was able to increase employment and alleviate

931

286

284 Cristóbal Kay argues: “ It

were deployed as cheap CEU eTD Collection Import Industrialization Substitution Conclusion 287 Latin America (ECLA) who onFDI heavily thus inequality. relied and contributedto income exports manufactured only ISI growth to a led nal internatio onthe Local competitive products indebted. hardly market were highly and foreign for sector exchange revenues.agricultural L for manufactur the subsidiesstate or licenses of allocation the import like policies ISI interests upon hinged cohesiveness and structural basis. Brazil continued to adhere to managed shiftKorea t equal. The negative impacts of ISI were mitigated by large amounts of US aid more distribution income made and cleavages dissolved reform class Thestructure. land institutional capacities equality. ISI fostered rent on impacts of ISI ISI of policies protectionist but indiscriminate the andowners further received government furtherandowners subsidies received to importance the due

Villela, Villela, The author agrees with SantiagoMacario from the EconomicCommission for Brazil, the by early 1980s heavily became industrialized, but a overcome could South Korea ISI distortions to its institutional inherited due “A bird’s eye view of Brazilian industrialization”, 58 ofindustrialization”, view Brazilian eye “A bird’s

state autonomy income a distribution and bureaucracy, functioning social and

ing sector. Industrialists were better off behind tariff walls. better off tariff sector. Industrialistsbehind were ing of the state less effective - cum - owards export and madeseekingand activities South Korea both in and Brazil surged beginning the in pointed out that the problem is problem the outpointed that - debt

strategy (ISI) - oriented industrialization because industrialization oriented of its state

51 caused caused distortionsseveral negative thathad . 287

and efficient The The

of the 1980s. The secon

that were to the detriment of export of export to detriment the that were local technological content technological of local .

as such as protection trade not

to ISI to since many t the same time time same wast the d stage of ISI ISI of stage d .

of the South

CEU eTD Collection Consensusimpacts of Washington last the decades in two t Thus, towards exportpromotion. promotion. 288

Colistete, Colistete, rt onexpo research further to conduct wants author he “ Revisiting import Revisiting 288 South Korea implemented protectionist measures even after its shift its shift after protectionisteven measures implemented South Korea - substituting industrialization in Brazil” in industrialization substituting

, 4

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Baer

1, no. 1, . No. No. .

and and