Import substitution industrialization and Export oriented in4dustrialization
Import substitution industrialization is defined as an economic phenomenon or theory that is applied through the country development or when emerging market nations are willing to increase their independent and decrease their dependency on wealthy countries. This theory mainly focuses on incubating and developing the small and infant industries so that they may emerge to compete with other imported goods and make the local economy stronger (Lee, 2004).
On the other hand, export oriented industrialization is simply defined as export led industrialisation or growth. A form of economic and trade policy that focuses on improving and speeding up the process involving industrialization and export of services and goods to nations that have a comparative advantage. It is also referred to as export substitution industrialization (Sapelli, 2003).
Why they didn’t work
According to Sapelli (2003) The Reason why EOI didn’t work in Latin America and Africa is due to the fact that these countries tried to export only single products leading to price fall as there was too much supply in regard to demand related to these products. Most of these products for instance include coffee, tea and other traditional related products.
On the other ISI failed to work in Latin America and Africa due to the fact that these countries are considered to be one of the poorest and hence their market for goods are relatively small. Due to the existence of these small markets, it became much hard to achieve economies of scale and market production ISI (Sapelli, 2003).
Industrial Strategy for the two Regions
One of the industrial strategies would involve changing the fundamental composition of the production concerning manufacturing. These would include promoting exports of product that are labour extensive as well as focusing on export of goods and services that are non-traditional. Secondly, I would apply Keynesian concept and infant industry based argument where I would encourage industrialization that is state induced through government spending. These will greatly help these countries grow economically.
References
Lee, A. (2004). In the name of harmony and prosperity. Albany: State University of New York Press.
Sapelli, C. (2003). The political economics of import substitution industrialization. Santiago: Pontificia Universidad Católica de Chile, Instituto de Economía.
