Modernization, Dependencia , and Import Substitution Industrialization

1. Modernization, Dependencia, and Import Substitution Industrialization Mexico

2. Financing ISI: Sources of State Revenue • Taxation • Imports and Exports • Income (individual and corporate) and payroll • Sales, property, etc. • Fees • Licensing fees and permits • State-owned industry • Monetary policy (printing) • Borrowing

3. Financing ISI: Borrowing The question is who to borrow from and how. • Ownership requirements require joint partnerships • Local content requirements stimulate the domestic market for intermediary goods • Restrictions on repatriation of profits

4. Modernization in Mexico:the Porfiriato Era “Order and Progress” • Economic Modernization • Modernization began in the rural areas • At the beginning of his Presidency imports totaled $20 million and exports $29 million; at the end imports totaled $205 million and exports $293 million • Focusing on the development of rail and telegraph lines to unite the country and facilitate export activities, as well as changes in land tenure to promote private property • Modernization was mainly paid for with foreign investment • Economic modernization favored large landholdings, pushing increasing numbers of landless peasants into the export-led market economy and competitive wage labor

5. Dependency Theory and ISI:Revolutionary Mexico • Dependency Theory in Mexico, though popular academically, never had much political sway. • ISI was associated with the revolutionary project as a means of benefiting clients of the PRI, sustaining their rule • Small Farmers • Unionized urban workers • Unionized public employees • Business Elites

6. Dependency Theory and ISI:Revolutionary Mexico Encouraging rural support • Agrarian reform: Article 27 of the Constitution allowed for the formation of ejidos • In total over 170 million acres were distributed from large estates to over 3 million peasants • By 1940 approximately ½ of cultivated land was held by ejidos and the number of landless rural laborers declined by almost 25% Encouraging urban support • Legal protections for unions and union members • Preferential access to social welfare programs

7. Dependency Theory and ISI:Revolutionary Mexico Encouraging domestic businesses • Low rates of taxation • Subsidize production inputs • Targeted barriers to market entry • Targeted import and export restrictions • Manipulation of exchange rate policy • Restrictions on FDI

8. Questions • What role do political motives play in the economy? To what extent do/can domestic political circumstances influence the national economy? • How should we understand the legacy of ISI? Debt and populism? Or industrialization and infrastructure improvements? • Dependency theory raised questions about distributive justice that remain valid. Do we have a way to address them?

9. A Note on Policy Papers • Problem: slow and/or unequal economic progress under capitalism. • Policy options: • Modernization • Export-oriented growth • Dependency • Import Substitution Industrialization NOTE: you must argue in favor of a policy