A Reconsideration of Import Substitution

From the outset of widespread concern with the economic development of low-income countries in the late 1940s, much attention has been given to the role that international activities play in explaining growth or its absence. One of the earliest general strategies of development that directly involves international transactions is that usually called import substitution. Import substitution of one form or another prevailed in many developing countries during the 1950s and early 1960s. In the late 1960s and early 1970s a quite contrary approach, identified as outward (or export) oriented, became increasingly common. This study examines the import substitution story - why and how it came to be - and the rise of the outward-oriented approach - why and how it came to be and - temporarily at least - to win the battle between the two approaches. The study then examines the doubts that have arisen with respect to the latter approach, and the nature of the new tensions that now exist with respect to an appropriate trade strategy.