Switching from import substitution to the 'New Economic Model' in Latin America: A case of not learning from Asia
Narula, Rajneesh (2002). Switching from import substitution to the 'New Economic Model' in Latin America: A case of not learning from Asia. UNU-MERIT Research Memoranda. UNU-MERIT.
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Sub-type Working paper Author Narula, Rajneesh Title Switching from import substitution to the 'New Economic Model' in Latin America: A case of not learning from Asia Series Title UNU-MERIT Research Memoranda Volume/Issue No. 32 Publication Date 2002 Publisher UNU-MERIT Language eng Abstract This paper argues that the East Asian success stories do not owe their growth to liberalised markets and laissez faire industrial policies, but to industrial development strategies that share several similarities to the import-substitution industrialisation (ISI) approach. There are, needless to say, some important fundamental differences which determine why Latin America and East Asia demonstrated such different outcomes, but these have become obvious only with hindsight. Nonetheless, the switch from ISI to the Washington Consensus-derived, neo-liberal 'New Economic Model' (NEM) has not in any way minimised these differences. I argue that the NEM ' as currently formulated ' cannot sustain long-term industrial development, and is likely to erode the gains made from ISI programmes for the sake of efficiency and export growth. The ISI-to-NEM shift has not re- oriented Latin America towards the East Asian model but away from it. I identify five important problems with the ISI restructuring model which have reduced the opportunities for duplicating the east Asian success story, 1.The attenuation of the role of government; 2. unreasonable expectations from the liberalisation of FDI for industrial development; 3. the failure to sustain absorptive capacity; 4. The failure to sequence FDI and domestic capacity in tandem; and 5. The failure to recognise the inertia of transition, and coordination failures. Copyright Year 2002 Copyright type All rights reserved -
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