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Import Substitution Industrialization

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1. What is Import Substitution Industrialization?

Import Substitution Industrialization (ISI) is a trade an economic policy that suggests the

replacement of imports with domestic production. It is based on the argument that a country

needs to reduce foreign dependency by producing products locally. Although this policy has

been supported since the 18th century by economists like Friedrich and Alexander Hamilton, it

mainly refers to the 20th-century economic development policy. The procedure was mostly

enacted by countries in the South Globe due to the emphasis on improving local development

and ensuring that there was self-sufficiency by expanding the domestic market and creation of

goods. The internal markets why mainly broadened through high taxation of imported goods to

prevent people from purchasing the imported products. ISI is meant to have established a state

lead economic development through the process of subsidization of critical industries such as

power generation industries and agricultural sectors, nationalization, through increased taxation

and using the high protectionists’ trade policies. Despite the immense embrace of ISI by most

developing countries, during the 1980s and 1990s, the insistence of the International Monitory

Fund and the World Bank made them abandon the policy. Their programs were attractive with

the adjustments of programs in the global market-driven liberalization that was aimed at the

global South.

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Source: Investopedia: The import substitution industrialization (ISI) is an economic theory

employed by developing or emerging market nations that wish to increase their self-sufficiency

and decrease their dependency on developed countries.

2. Raul Prebisch was one of the prominent proponents of ISI, write a short biography of

him(between 200-400 words)

Rau Prebisch was born on April 17, 1901, in Tucuman, Argentina. He studied Economics at

the University of Buenos Aires and joined the School of Economics faculty. He was a political

economics professor from 1925 to 1948. He also held several relevant posts in the public sector

while he was a professor. First, from 1921-1927, he was the Director of the Argentine

Department of Statistics. From 1927-1939, he became the director of National Bank of

Argentina, and he worked under the secretary of finance from 1930 to 1932. He later became the

first director-general of the Argentine Central Bank in 1935-1948 while he joined the United

Nations Economic Commission for the Latin America (ECLA). In this position, Raul was

appointed the executive secretary, a position that he held up to the years 1963. He was the

Secretary-General for United Nations Conference on Trade and Development (UNCTAD) from

1965 to 1969, and after that, he was appointed the director-general of the United Nations Latin

American Institute for Economic and Social Planning.

3. Explain why Prebisch and others proposed ISI (up to 250 words)

Before the late 19th century, the Latin America used the state-control approach to control the

markets, and the dependency theory influenced it. It brought about state dominance with a closed

economy, the general demotion of the market and the import barriers. The use of dependency

theory was a result of the collapse of the commodity prices due to the Great Depression in the

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Surname 1 Surname Course Tutor Date 1. What is Import Substitution Industrialization? Import Substitution Industrialization (ISI) is a trade an economic policy that suggests the replacement of imports with domestic production. It is based on the argument that a country needs to reduce foreign dependency by producing products locally. Although this policy has been supported since the 18th century by economists like Friedrich and Alexander Hamilton, it mainly refers to the 20th-century economic development policy. The procedure was mostly enacted by countries in the South Globe due to the emphasis on improving local development and ensuring that there was self-sufficiency by expanding the domestic market and creation of goods. The internal markets why mainly broadened through high taxation of imported goods to prevent people from purchasing the imported products. ISI is meant to have established a state lead economic development through the process of subsidization of critical industries such as power generation industries and agricultural sectors, nationalization, through increased taxation and using the high protectionists’ trade policies. Despite the immense embrace of ISI by most developing countries, during the 1980s and 1990s, the insistence of the International Monitory Fund and the World Bank made them abandon the policy. Their programs were attractive with the adjustments of programs in the global market-driven liberalization that was aimed at the global South. Sur ...
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