Principles of Macroeconomics / Unit 16 MAC 1512 short lesson, about 20 seconds
Why Import Substitution Failed
Captions available
The idea
Protecting new domestic industries required very high tariffs, which removed the competition that would have disciplined them. The industries built were capital and skill intensive, which is what poor economies have least of.
In practice
Permit systems for essential imported parts put firms' fortunes in officials' hands.
Where people slip
No country relying on this strategy succeeded, while economies that stayed open to trade did.
Your place on the trail
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Unlocks
- Nothing yet depends on this.
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