The Political Economy of Industrialisation in Primary Product Exporting Economies: Some Cautionary Tales

Ever since the collapse of primary commodity prices during the Great Depression and the attendant balance of payments problems faced by most of the primary product export economies of the third world, industrialisation has been viewed as the major panacea for developing most of these economies. Much of the resulting industrialisation has been import substituting — some of it naturally induced as the relative profitability of domestic import substitutes rose with the terms of trade and accompanying real exchange rate changes which resulted from the inter-war collapse of primary commodity prices and the subsequent disruption of international trade during the Second World War. But in many countries both the inter-war difficulties with primary product export-led growth and the rise of economic nationalism — which has been a characteristic of most of the Third World since the Second World War — has led to the institution of protective systems which have pushed industrialisation beyond these ‘natural’ levels by tariff- and quota-induced ‘hothouse’ import-substituting industrialisation.