Import substitution policy
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As import substitution policy referred to developmental approaches based on the substitution of imports targeted by domestic production. This usually takes place in the form of a corresponding industrialization .
Expectations of import substitution
Since many developing countries have an import structure characterized by industrial goods, an important aspect of import substitution is de facto often industrialization , which was practiced especially by countries in Asia in the middle of the 20th century . The fact that sales markets do not have to be built up was seen as an advantage of such a policy . Growth , employment and balance of payments effects in particular were expected . In detail, these are secondary growth impulses , currency savings v. a. by replacing imports of consumer goods and expanding employment in the new industries .
Import substitution instruments
Essentially, representatives of import substitution policy demand development protectionism .
In agrarian societies with high hidden unemployment which is marginal product of the factor of production work usually considerably lower than the actually paid average wage. As a result, increased nominal wages would have to be paid in the industries in order to make them attractive for employees. Since these are not competitive on the world market, this justifies protectionist protective tariffs in order to enforce lower real wages through increased domestic prices for the expansion of these sectors .
Protective tariffs also appear suitable to encourage direct investment and relocation of production (see outsourcing ) by foreign investors.
Temporary protection ( education tariffs ) is also necessary in order to promote learning and growth processes in young local industries and thus enable them to grow into optimal company sizes ( economies of scale ).
criticism
Long-term studies have shown, however, that import substitutions are not successful from a development policy perspective. Import restrictions in the consumer and industrial goods sector initially result in excessive prices , which can lead to the corresponding production sector in the developing country being oversized. This can lead to an economic misallocation and hinder the entire export area.
Another problem is the small size of many developing economies, which makes domestic markets unlikely to grow over the long term.
The goal of building a capital-intensive , "modern" sector also leads to high additional imports of capital goods (and raw and intermediate goods), which further exacerbates import dependency. The at least initial domestic market orientation does not generate any foreign exchange income, but triggers further foreign exchange expenses. This in turn exacerbates the balance of payments problem.
Jagdish Bhagwati believes the import substitution policy has failed. Countries like China , India and the Asian tiger states have only been able to increase their economic output and fight poverty through an increased external orientation of trade policy .
See also
Individual evidence
- ↑ Jagdish Bhagwati (2004): In Defense of Globalization. Oxford University Press, pp. 51ff.