The Import-Substitution Model

Abstract

The standard characterization of Latin America's import-substitution model of development and its “failure” overlooks two important issues. First, models of development do not spring forth full-blown with self-evident virtues or fatal flaws as politicized public policy analysts claim. They emerge over time as responses to international and domestic socioeconomic and political crises. They spring from attempts to restore economic growth and political order and are later formalized as models. In that sense, import-substitution industrialization had significant success for a number of decades. Secondly, given Latin America's situation of dependency, international economic crises before and after World War II and the characteristics of the world capitalist economy that emerged after the war had a significant impact on the rise and fall of import-substitution industrialization. However, there was considerable variation in the timing and sequencing of this impact and the extent to which these international factors affected the rise and fall of the model in Chile, Argentina, Mexico, and Brazil. Differences in domestic factors, such as state formation, party systems, and the social coalitions that supported and opposed import-substitution industrialization, account for that variation. Moreover, the decline of the model should be understood in terms of the degree of departure from industrial policy and inclusive social policy, not in terms of some intrinsic incapacity.