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#1 Oct 10, 2019 4:38 pm

New Historian
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Before globalization was another failed policy: import substitution

Import substitution was an old discredited economic policy that Caribbean countries followed in the fifties and onwards. It was also called industrialization by invitation, which was copied from the “Operation Bootstrap” program in Puerto Rico. All of these policies involved Caribbean governments giving generous tax exemptions to foreign companies to set up manufacturing subsidiaries in the Caribbean (or wherever). The basic idea was that a country should not be dependent on imports, and should seek to produce the major items that it consumes. So, factories would be set up producing detergent, televisions, processed foods and shoes for the local markets and possibly for export too.

But because the local markets were so small, manufacturers would not be able to take advantages of economies of scale, goods produced locally were more expensive than what could be imported from abroad. So, local governments protected the foreign businesses operating in their country by charging high import duties on competing items, making imports more expensive that locally produced goods. The two downsides of this policy were that locally produced goods were very expensive – and shoddy. Because local manufacturers had a protected home market without competition from cheap imports, their quality went down. A classic example of this was Bata Shoes; every Caribbean kid grew up wearing cheap Bata shoes that fell apart after a couple of months.

Did the policy work? No. If “development” is the upliftment of the masses of the population, then import substitution cannot be said to be a success. It created a lot of unskilled low-paying jobs in “screwdriver industries”, and it also made a few rich people very richer. But real economic development means more than that.

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#2 Oct 10, 2019 8:05 pm

Dancer
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Re: Before globalization was another failed policy: import substitution

Well New Historian , you in the first  couple of sentences  , explained Governments and trade in the Caribbean.
My  west Indian  Political  / Social  understanding jumped 15%. lol.
Yeah . .....  Makes sense.
I wonder how many of  Caribbean politicians understand , that .  You should be told that info , in your student  politician days. lo.
........

Good information  :  Educational.

Lmao.  Well  , can you imagine , at one of those lectures on the island.  My friend says  a lot of the older guys go to lectures instead of bar stopping.  sad. lo.

""    and if , I am at one  I could  hear myself  asking a question about import substitution or industrialization by invitation ."
Lord !

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#3 Oct 10, 2019 8:52 pm

Expat
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Re: Before globalization was another failed policy: import substitution

Currently everything is expensive, if we are talking aggry culture either you have half decent prices in the shop if it is marketing board, but farmers have had sand in the Vaseline marketing board used to shaft them, or you get a half decent rate from IGA, but the local produce is often more expensive than the imported stuff, and often despite quality checking on delivery often the home market produce is shabby compared to the imported stuff.

As an idea, expanding industry in a small economies of scale market, and diversifying potential work experience should have benefited the home market, but if the entrepreneur abuses the system and makes shoddy product it is as you say a lose lose situation.

The best idea is to be a Trinidad or JA national, then your economies of scale are not so small.

Small islanders should just accept they are screwed, build a raft and hope to land somewhere better....

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#4 Oct 11, 2019 8:16 am

Real Distwalker
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Re: Before globalization was another failed policy: import substitution

What's wrong with globalization?  Don't you believe there is efficiency in the division of labor?  Should we be growing nutmeg in Iowa in greenhouses?

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#5 Oct 11, 2019 9:12 am

New Historian
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Re: Before globalization was another failed policy: import substitution

Real Distwalker wrote:

What's wrong with globalization?  Don't you believe there is efficiency in the division of labor?  Should we be growing nutmeg in Iowa in greenhouses?

Globalization is a race to the bottom. Globalization means no tariffs or other distortion and you buy from the cheapest source, wherever that may be. That means China - for now. But this too won't last, as incomes rise in China it won't be the globe's bottom-feeders anymore, that dubious honour will move on, to the newest last run in the ladder. We're already seeing this in China's plastics ban, they're no longer willing to be the world's garbage can for recycled materials, the result? Recycling is no longer profitable - onto the landfill with it!

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#6 Oct 11, 2019 9:26 am

New Historian
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Re: Before globalization was another failed policy: import substitution

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#7 Oct 11, 2019 2:19 pm

Real Distwalker
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Re: Before globalization was another failed policy: import substitution

Hmmm... Tell me other ways we can improve the economy by taxing consumption, suppressing commerce, restricting trade, reducing efficiency and shrinking markets.   I am intrigued.

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#8 Oct 11, 2019 3:19 pm

New Historian
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Re: Before globalization was another failed policy: import substitution

Real Distwalker wrote:

Hmmm... Tell me other ways we can improve the economy by taxing consumption, suppressing commerce, restricting trade, reducing efficiency and shrinking markets.   I am intrigued.


Ask you're own country, they're the world champions of protectionism!

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#9 Oct 11, 2019 4:44 pm

Real Distwalker
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Re: Before globalization was another failed policy: import substitution

Protectionism is stupid as all hell when the United States does it too.  Protectionists are to economics what flat-earthers are to geophysics.

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#10 Oct 11, 2019 5:23 pm

New Historian
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Re: Before globalization was another failed policy: import substitution

So what do you think about trading blocs, like the EU? Isn't there some sense in creating a bigger market and harmonizing external tariffs and trading rules? The UK will shortly find out how beneficial that was, classic case of foot-shooting.

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