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    • This economic reality possibly prompted

    2018-10-31

    This economic reality possibly prompted Bairoch (1993:30) to describe the United States as the “mother country and bastion of modern protectionism”. According to Bairoch (1993), although protectionism in the United States dates back to 1860s, the continent recorded the highest global tariff volume in 1920s and the protectionist measures adopted by the United States during that further info was unequal in global economic history. Even prior to the 1920s, government policies in the United States have always been embedded in protectionism. For example, President Ulysses Grant who ruled the United Sates between 1869 and 1877 was quoted by Chang (2012:45) to have retorted, “Within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade”. The proposition that almost all the advanced economies adopted the ISI policy at some point in time was further espoused by the German experience. In fact, Germany was regarded as the ‘mother nation’ of protectionism, according to Chang (2012). France, the Netherlands, Switzerland, and the industrialised Asian countries such as Korea and Japan were not immune to these ISI protectionist practices in the early days of their industrialisation. In summary, while the advanced economies such as United States and Britain canvass for limited social spending in the developing world, they structurally engender social justice in their shores. In specific, the Temporary Assistance for Needy Families (TANF) program in the United States provides a safety net of about 60 monthly salaries for those that lose their jobs. According to Lemieux (2013:227), the welfare-state functions cover 57 percent of total government expenditures in the United States. The figure stands at 63 percent for the typical euro zone country.
    3. Why ISI? The ISI industrial policy is premised on the realisation that economic development and more specifically, industrialisation can only be achieved by developing local capacity that is capable of substituting imports in order to reduce or possibly eliminate economic leakages. This policy became popular in today׳s developing economies shortly after the Second World War, essentially because production resources were directed away from household manufacture to war armaments during the war by the developed economies and the cost of living skyrocketed shortly after the war, which exerted pressure on the meagre foreign reserves of the developing economies (Ahmad, 1978). The second driver of this policy was the global economic meltdown, which affected the prices of the primary products that constituted (and still constitutes) the major exports of the developing economies. As hypothesised by Prebisch (1959), low demand and inelasticity of supply will continuously lead to a decline of primary commodity prices, which the economies of most developing countries depend on, thereby necessitating material beneficiation in order to ultimately boost exports. However, it is impossible for any economy to export manufactured goods without building the indigenous infrastructure required for such production (Ahmad, 1978). Moreover, ISI is seen as a catalyst to achieve economic diversification (Shafaeddin & Pizarro 2007). Evidence from the industrialised economies suggests that economic diversification is achievable within the policy frameworks of ISI. In that, the mechanisms deployed in the implementation of this policy (reduction of tariffs on input resources, high import duties or locally manufactured goods, exchange rates differential, and eventual abolition of export duties) help the developing economies to garner the requisite industrial experience to embark on competitive exportation of manufactured goods (Schmitz, 2007). From the foregoing, it becomes imperative that the developing countries were compelled to adopt policy initiatives that galvanises material beneficiation in a globally competitive manner – hence, the justification for the adoption of ISI policy at the early phase of their industrialisation. As observed by Naseem (1973:36), “if it can be determined that the crucial bottleneck facing a country is that of foreign exchange and if exports are not perfectly elastic at a given price, the obvious strategy for such a country is to embark on the policy of import substitution or the domestic production of importables”. The argument for economic diversification also bears forth for the adoption of ISI policy by the developing economies. More specifically, in order to diversify an economy, it is important to embark on indigenous capability development or more appropriately, indigenous technological capability enhancement. To achieve this, the need for strong government intervention and some form of protectionism are inevitable (Schmitz, 2007).