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I thought that import substitution had long been discarded as an explanation for economic growth in Japan, Taiwan and South Korea. These economies were much mor
by taffer 5y ago
I thought that import substitution had long been discarded as an explanation for economic growth in Japan, Taiwan and South Korea. These economies were much more open than other countries at the time. A good counterexample would be Argentina, which tried import substitution without opening up to trade - and failed miserably.
- strangeattractr 5y agoHonestly, Argentina has tried almost every style of economic management and failed. As I said they were investment led growth miracles, but I think that people who dismiss the importance of exports to these countries are extremely misguided. Exploiting excess labour for labour intensive industries e.g. garment manufacture in export markets they gained much needed income to import raw materials needed for heavy industry. By suppressing wages and thus consumption, they made savings available to invest into capital intensive industry which then came to dominate their exports. Once they had developed sufficiently the investment led growth becomes self-sustaining. If your exports are growing at 20% p.a. as Japan's were in the 60s and 70s, investment in infrastructure becomes justified particularly when the country is underinvested after a war. But the shift to consumption led growth is difficult to achieve, it's why you see debt to GDP climb after the period of initial growth as malinvestment becomes common. Consumption's share of GDP in South Korea is still extremely low, Japan's only began to climb after complete collapse in 1990, China's is the lowest of all at 55%.