IDEAS home Printed from https://ideas.repec.org/p/unm/umamer/2002042.html
   My bibliography  Save this paper

Switching from import substitution to the ‘New Economic Model’ in Latin America: A case of not learning from Asia

Author

Listed:
  • Narula, Rajneesh

    (MERIT)

Abstract

This paper argues that the East Asian success stories do not owe their growth toliberalised markets and laissez faire industrial policies, but to industrial developmentstrategies that share several similarities to the import-substitution industrialisation (ISI)approach. There are, needless to say, some important fundamental differences whichdetermine why Latin America and East Asia demonstrated such different outcomes, but thesehave become obvious only with hindsight. Nonetheless, the switch from ISI to theWashington Consensus-derived, neo-liberal ‘New Economic Model’ (NEM) has not in anyway minimised these differences. I argue that the NEM – as currently formulated – cannotsustain long-term industrial development, and is likely to erode the gains made from ISIprogrammes for the sake of efficiency and export growth. The ISI-to-NEM shift has not re-orientedLatin America towards the East Asian model but away from it. I identify fiveimportant problems with the ISI restructuring model which have reduced the opportunities forduplicating 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. thefailure to sustain absorptive capacity; 4. The failure to sequence FDI and domestic capacity intandem; and 5. The failure to recognise the inertia of transition, and coordination failures.

Suggested Citation

  • Narula, Rajneesh, 2002. "Switching from import substitution to the ‘New Economic Model’ in Latin America: A case of not learning from Asia," Research Memorandum 042, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:umamer:2002042
    as

    Download full text from publisher

    File URL: https://www.merit.unu.edu/publications/rmpdf/removed.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Narula, Rajneesh, 2002. "The implications of growing cross-border interdependence for systems of innovation," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    2. Mortimore, Michael, 2000. "Corporate Strategies for FDI in the Context of Latin America's New Economic Model," World Development, Elsevier, vol. 28(9), pages 1611-1626, September.
    3. Pack, Howard, 2001. "The Role of Acquisition of Foreign Technology in Taiwanese Growth," Industrial and Corporate Change, Oxford University Press, vol. 10(3), pages 713-734, September.
    4. Rajneesh Narula & John Dunning, 2000. "Industrial Development, Globalization and Multinational Enterprises: New Realities for Developing Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 141-167.
    5. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    6. Suh, Joonghae, 2000. "Korea's Innovation System: Challenges and New Policy Agenda," UNU-INTECH Discussion Paper Series 2000-04, United Nations University - INTECH.
    7. Bon Ho Koo & Dwight H. Perkins (ed.), 1995. "Social Capability and Long-Term Economic Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-13512-7.
    8. Lall, Sanjaya, 1992. "Technological capabilities and industrialization," World Development, Elsevier, vol. 20(2), pages 165-186, February.
    9. Hoekman, Bernard, 2002. "Economic Development and the WTO After Doha," CEPR Discussion Papers 3374, C.E.P.R. Discussion Papers.
    10. Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
    11. Paola Criscuolo & Rajneesh Narula, 2008. "A novel approach to national technological accumulation and absorptive capacity: aggregating Cohen and Levinthal," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(1), pages 56-73.
    12. Reinhardt, Nola & Peres, Wilson, 2000. "Latin America's New Economic Model: Micro Responses and Economic Restructuring," World Development, Elsevier, vol. 28(9), pages 1543-1566, September.
    13. Sanjaya Lall, 1996. "Learning from the Asian Tigers," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-38989-2.
    14. Linsu Kim, 1995. "Absorptive Capacity and Industrial Growth: A Conceptual Framework and Korea’s Experience," Palgrave Macmillan Books, in: Bon Ho Koo & Dwight H. Perkins (ed.), Social Capability and Long-Term Economic Growth, chapter 13, pages 266-287, Palgrave Macmillan.
    15. Ramos, Joseph, 2000. "Policy Directions for the New Economic Model in Latin America," World Development, Elsevier, vol. 28(9), pages 1703-1717, September.
    16. Michael Hobday, 1995. "Innovation In East Asia," Books, Edward Elgar Publishing, number 226.
    17. Richard B. Freeman & David L. Lindauer, 1999. "Why Not Africa?," NBER Working Papers 6942, National Bureau of Economic Research, Inc.
    18. repec:umd:umdeco:rodriguez9901 is not listed on IDEAS
    19. Carl J. Dahlman & Richard Nelson, 1995. "Social Absorption Capability, National Innovation Systems and Economic Development," Palgrave Macmillan Books, in: Bon Ho Koo & Dwight H. Perkins (ed.), Social Capability and Long-Term Economic Growth, chapter 5, pages 82-122, Palgrave Macmillan.
    20. Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Narula, Rajneesh & Marin, Anabel, 2003. "FDI spillovers, absorptive capacities and human capital development: evidence from Argentina," Research Memorandum 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    2. Narula, Rajneesh. & Marín, Anabel., 2005. "Foreign direct investment spillovers, absorptive capacities and human capital development : evidence from Argentina," ILO Working Papers 993782123402676, International Labour Organization.
    3. Figueiredo, Paulo N., 2008. "Industrial Policy Changes and Firm-Level Technological Capability Development: Evidence from Northern Brazil," World Development, Elsevier, vol. 36(1), pages 55-88, January.
    4. repec:ilo:ilowps:378212 is not listed on IDEAS
    5. Narula, Rajneesh & Marin, Anabel, 2005. "Exploring the relationship between direct and indirect spillovers from FDI in Argentina," Research Memorandum 024, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    6. Guillermo Rozenwurcel, 2006. "Why Have All Development Strategies Failed in Latin America?," WIDER Working Paper Series RP2006-12, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rajneesh Narula, 2015. "The Importance of Domestic Capabilities for FDI-assisted Development: Lessons from Asia and Latin America," John H Dunning Centre for International Business Discussion Papers jhd-dp2015-05, Henley Business School, University of Reading.
    2. Lall, Sanjaya & Narula, Rajneesh, 2004. "FDI and its role in economic development: Do we need a new agenda?," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    3. Rajneesh Narula, 2004. "Understanding absorptive capacities in an "innovation systems" context consequences for economic and employment growth," DRUID Working Papers 04-02, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    4. Narula, Rajneesh, 2002. "The implications of growing cross-border interdependence for systems of innovation," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    5. Rajneesh Narula & John Dunning, 2010. "Multinational Enterprises, Development and Globalization: Some Clarifications and a Research Agenda," Oxford Development Studies, Taylor & Francis Journals, vol. 38(3), pages 263-287.
    6. Narula, Rajneesh & Portelli, Brian, 2004. "Foreign direct investment and economic development: Opportunities and limitations from a developing country perspective," Research Memorandum 009, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    7. Intarakumnerd, Patarapong & Chairatana, Pun-arj & Tangchitpiboon, Tipawan, 2002. "National innovation system in less successful developing countries: the case of Thailand," Research Policy, Elsevier, vol. 31(8-9), pages 1445-1457, December.
    8. Sanjaya Lall, "undated". "FDI and Development: Policy and Research Issues in the Emerging Context," QEH Working Papers qehwps43, Queen Elizabeth House, University of Oxford.
    9. Chang-Yung Liu & Jie Yang, 2003. "A Comparative Analysis On Technology Innovation & Diffusion System And Industrial Innovation Between Taiwan And Mainland China," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 7(04), pages 443-473.
    10. Fagerberg, Jan & Srholec, Martin & Verspagen, Bart, 2010. "Innovation and Economic Development," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 833-872, Elsevier.
    11. Narula, Rajneesh. & Marín, Anabel., 2005. "Foreign direct investment spillovers, absorptive capacities and human capital development : evidence from Argentina," ILO Working Papers 993782123402676, International Labour Organization.
    12. Eva Paus & Nola Reinhardt & Michael Robinson, 2003. "Trade liberalization and productivity growth in latin american manufacturing, 1970–98," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(2), pages 127-127.
    13. Paola Criscuolo & Rajneesh Narula, 2008. "A novel approach to national technological accumulation and absorptive capacity: aggregating Cohen and Levinthal," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(1), pages 56-73.
    14. Michael T. Rock, 2002. "Exploring the impact of selective interventions in agriculture on the growth of manufactures in Indonesia, Malaysia, and Thailand," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(4), pages 485-510.
    15. Rajah Rasiah & Jebamalai Vinanchiarachi, 2013. "Institutional Support and Technological Upgrading: Evidence from Dynamic Clusters in Latin America and Asia," World Economic Review, World Economics Association, vol. 2013(2), pages 1-24, February.
    16. Narula, Rajneesh & Marin, Anabel, 2003. "FDI spillovers, absorptive capacities and human capital development: evidence from Argentina," Research Memorandum 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    17. Narula, Rajneesh, 2018. "Multinational firms and the extractive sectors in the 21st century: Can they drive development?," Journal of World Business, Elsevier, vol. 53(1), pages 85-91.
    18. Alexis Habiyaremye, 2019. "Enhancing productive capabilities through intra-regional trade and cross-border investments in Southern Africa," Development Southern Africa, Taylor & Francis Journals, vol. 36(4), pages 409-425, July.
    19. repec:ilo:ilowps:378212 is not listed on IDEAS
    20. Narula, Rajneesh, 2001. "Multinational Firms, Regional Integration and Globalising Markets: Implications for Developing Countries," Research Memorandum 035, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    21. Alexis Habiyaremye, 2008. "Economic Proximity and Technology Flows: South Africa's Influence and the Role of Technological Interaction in Botswana's Diversification Effort," WIDER Working Paper Series RP2008-92, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    economic development an growth ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unm:umamer:2002042. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Leonne Portz (email available below). General contact details of provider: https://edirc.repec.org/data/meritnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.