The Ethics of Import Substitution*

Just over a fortnight ago, President Chávez announced a long over-due currency adjustment, thus setting a new official exchange rate for the Bolivar (see Gregory Wilpert’s, “Currency Adjustment: Necessary, but is it Socialist?”, CdOI, 22/01/10). The exchange rate modification sought to account for inflation and, as National Assembly Deputy Ricardo Sanguino stated, to “correct import - export anomalies”.

Amid the raft of economic measures that Chávez presented in order to facilitate the currency adjustment, the creation of a new special fund that would seek to assist national production and aid import substitution efforts was announced.

The newly created Socialist Production Bicentenary Fund (“Fondo Bicentenario Productivo Socialista”), with an initial allocation of one billion dollars, will be headed by Jorge Giordani who is currently the Minister for Planning and Development. Giordani is also known as something of an intellectual, and has recently written on Antonio Gramsci and theorised on 21st Century Socialism. The Bicentenary Fund is off to a good start; it has already setup and publicized its toll-free 0-800-PRODUCE and 0-800-EXPORTA phone numbers!

The truth is that there are many reasons to think positively about the new Bicentenary Fund and Import Substitution Industrialisation (ISI), the theory behind it. ISI simply makes sense, if one upholds values such as state sovereignty, cultural diversity and autonomy, political independence and the like.

In its heyday ISI policies essentially promoted industrialisation and development by systematically reducing imported goods and dependence on foreign market logics, while encouraging domestic production, which would spiral into job creation and growth. However, critics of ISI often rallied against it, labelling it as covert protectionism, or, the more subtle, by pointing to its seemingly confused privileging of consumption. Further, we might say, ISI sought to replace selected imported goods, though it did not necessarily seek to displace market-oriented production or market generated consumption patterns. Issues that we would have to seriously consider in any move towards socialist or participatory politics.

Nevertheless, recent research on the ISI experience across Latin America, a period spanning almost 50 years, from 1930s until early 1980s, suggests that ISI is rather a success story. It can be argued that the higher economic growth rates across the region during those years, as contrasted with the neoliberal decades that followed, are directly linked to ISI programs. Check out the articles collected in the Latin American Research Review 2005 special issue on the topic (Vol. 40, No. 3, October).

The key figure behind ISI was, of course, Argentinean economist Raul Prebisch, who is clearly identified by most as its “adoptive” father. (See Prebisch’s classic The Economic Development of Latin America and its Principal Problems, 1950.) ISI was, in fact, very much a Latin American strategy born of circumstance after the Great Depression. Still, Prebisch is now known not solely for having been its main advocate, but also for having explored the limits of industrialisation and, in this sense, questioned notions of growth and development wholly focused on industrial expansion. We might even suggest that this questioning—once again, born of circumstance—signals the coming of post-development discourses. Curiously, the Inter-American Development Bank through its Institute for the Integration of Latin America and the Caribbean—a friend neither to post-development approaches nor to post-liberal politics—recently published a collection of essays on Prebisch (available through its website: www.iadb.org/intal). Clearly, ISI is making something of a comeback, even in the most unexpected places.

It is fair to say that the Fondo Bicentenario comes at a good time, and it will be interesting to see how it relates to an already existing array of State institutions and the Government sponsored grassroots community councils and communes. The latter being a centrepiece of Venezuelan Socialism. Yet, the real test for the Fund lies in its lasting contribution to a tenable economic ethics of social justice.

*Carlos Eduardo Morreo is a lecturer in Politics at the Universidad Central de Venezuela and a researcher at the Centro de Estudios Latinoamericanos “Rómulo Gallegos”