EH101: The Internationalisation of Economic Growth, 1870 to the Present.

Examples of Actual Exam Answers (2010)

1st
Why did so many people emigrate to the US, and to what effect?
The US was the top destination for immigrants all over the world, although in the
period before 1914, immigrants were largely from Europe. The reasons for
immigration varied from easier transportation to seeking religious freedom. The
effects were widespread impacting upon US natives as well as the immigrants who
came, and also on the countries the immigrants came from. Immigration policies
changed over time and the US is more strict today about immigration with skilled
visas and greater regulation.
The reasons that caused people to migrate to the US consisted of numerous things.
One was the decreasing maritime costs of period this was arguably due to better
technology or as argued by North, due to better organisation as the technology arrived
too late. Regardless, costs of travel had decreased and individuals no longer had to
sell themselves into labour contracts to pay for passage, so immigration increased.
Another reason was that the US was perceived as the land of political and religious
freedom so people who suffered in their countries migrated. Likewise, individuals
from countries with economies which were experiencing downturns chose to move to
the US in the prospect of higher wages. There was also the friends and relatives effect
which encouraged others to move to the US. One historian stated that immigration
was a vent for surplus population from countries with high natural rates of increase.
The result of this mass migration was that over of US population (1914) consisted
of immigrants, as over 40% of people left Europe (1820-1914) and 24% went to the
US. The benefit to Europe was very high although losing population; it allowed wages
to increase and standards of living to increase also. Although not all countries
benefited, for instance, Ireland lost men as they migrated to the US and Britain,
preventing the growth of the Irish economy.
The benefits of the US from immigration were far reaching, firstly immigrants
brought with them skills and technologies from Europe, e.g. in New Jersey they
benefited from pottery techniques from Staffordshire, England. Also immigrant labour
was far cheaper than natives allowing industry to hire immigrant labour (often
unskilled) to work for less in industry reducing costs and increasing profits. This
was also beneficial to natives as many skilled natives were in unskilled jobs, the
arrival of immigrants allowed for their upward displacement. Also as immigrants
filled the jobs in industry, it allowed natives (usually the children of farmers as
wealthy) to go West and set up farms (as this was too costly for immigrants equivalent
to 2 years of wages just for setup although land was free under the Homestead Act). It
was vital that these firms be developed as the US, although highly industrialised was
largely an agricultural goods exporter. Immigrants further aided the US economy
increasing the domestic market size. Immigrants adopted American tastes allowing for
a homogeneous market meaning goods could be produced in long production and runs
and standardised goods thus reducing costs immensely. It was this type of mass
production for this massive market which allowed the US to become the richest
economy in the world by 1900, and to maintain such dominance for years to come.

Yet there were also effects on the immigrants themselves, often they were far
underpaid than natives, although some suggest otherwise. Their living conditions
were very poor, often in city slums, the services they received such as education were
likewise poor. Also, one must differentiate as Hatton and Williamson do the difference
between old and new immigrants. New immigrants were from Southern Europe whilst
new were from the West. New immigrants were largely unskilled and were at a great
disadvantage to the Old immigrants, especially in terms of wage. Hatton and
Williamson also highlight how wages varied between the ages immigrants arrived and
second generation immigrants were at a lower wage disadvantage, almost equal to
natives. The US senate instructed an interpretation into immigration which
highlighted assimilation was not successful and that discrimination continued. Such
discrimination can be thought to be reflected in the 1920s Quota Act as natives did
not always like the presence of immigrants this was largely white unskilled labour
(natives) which was replaced by skilled immigrants. The Quota Act was also partially
a follow on from the Red Scare in 1917. Overall, the lives of immigrants may have
improved from back home, however they did not match natives and they were subject
to discrimination.
Post 1945 immigration to the US was highly different. The reasons were largely the
same, although now included greater political refugees escaping wars. Although the
US still welcomed immigrants, there were greater controls such as the requirement of
skilled visas this ensured skilled workers entered the US which would benefit the
economy far more as machines had largely replaced the need for masses of unskilled
labourer in industry. The countries that immigrants came from changed slightly, there
was greater inter European migration so although the US was still the top destination
Europe also saw migration. Colonies and former colonies saw individuals migrating
largely they went to Britain or Europe but some did go to the US. However,
immigration was not necessarily long term, giving rise to the guestworker hypothesis
where immigrants leave the new country when unemployment increases. So even
post 1945, the US welcomed immigrants although to a lesser degree than before and
in a slightly more controlled manner.
A consequence of the US restriction on immigration has given rise to an increase in
illegal immigrants despite the risk of deportation they continue to work where
possible this can be seen for example in the Mexican workers who work illegal in the
US for summer jobs. Also, the restrictions have meant that there has been greater inter
and third world migrants such as Rwanda refugees to Zaire, this has been a boon to
Third World countries. It is also clear that the US actions and policies on immigration
have global effects.
Yet, despite the negative consequences, immigrants today and descendants of
immigrants are enjoying better standards of living, wages have improved and there
are greater equal rights. Those of immigrant origin aid the world globally through
sending remittances back to family from their country of origin helping where
possible. Also the US immigration policy is still reasonably relaxed compared to the
British, with far looser marriage laws (marrying foreigners who then become citizens)
and the possibility of bringing family to the US once you have immigrated is
reasonably easy if you gain citizenship.
In conclusion, the main reason for immigration to the US be it pre-1914 or post is
largely due to the desire for a better standard of living and often an escape from a
disadvantageous society or economy. The US benefitted immensely from immigration

 largely because it chose to industrialise, had it chosen to remain agriculturally based

it would have been wealthy like New Zealand but with a far smaller population. The
US economy was able to because dominant in the world because of the workers that
immigrated. Although lives for immigrants were difficult at first they were beneficial.
It is clear that US immigration policy impacts upon the world and the effects of
immigration on the US overall have been and continue to be extremely beneficial
ensuring that it remains a great economy.
Examiners Comments
Grade: 72 - 77
-

Some information is completely irrelevant (last three paragraphs are

disconnected)
But the rest is really rather good
Very broad yet detailed survey
Shows a great grasp of the material and a solid sum up of the analytical
issues.

To what extent does geography explain long run economic performance?

The effect geography has on economic performance is apparent if looking at a world
map with income information. There are no wealthy countries between the tropics and
there is evidence to show income increases with distance from the equator. However,
geography in itself is not capable of explaining why economic performance is
different landlocked countries can be wealthy, as can those with no resources.
Whilst the North and South of Africa may be obviously wealthier than the rest of the
country, the four poorest countries are not localised near each other. In reality, it is not
geography itself that makes a country poor but instead it is the effect that geography
has on the development of institutions that can truly explain long run economic
performance.
Many geographic determinists believe that it is geography itself that determines longrun economic performance. For example, David Landes discusses the role of climate
in explaining differentials in output. In cool climates, people must work to keep warm
where as in a warm country you must not work to keep cool which he argues lead to
major difference in the level of output. Jared Diamond sees lack of domesticated
animals as a major cause of the failure of growth of Africa. Low rainfall, arid soils
and poor climate may all adversely affect the long-run economic performance. Sachs
and Warner use evidence to suggest that malaria and an income of a country are
directly related. More evidence of the role of geography on economic performance is
demonstrated if looking at a map of world income without a doubt proximity to the
tropics does seem to lower income.
However, many people point out that geography in and of itself is not enough to
condemn a country to poor growth. Many suggest that being landlocked is a
geographic cause of poor economic performance and yet Switzerland is still very
wealthy. Japan lacks many natural resources and yet is again one the worlds largest
economies, even those with beneficial geography conditions like natural resources the
oil producing states are not more wealthy than others. These anomalies of geographic
determinism suggest that geography by itself cannot be the major determinant of longrun economic performance.
Geography does play the major role in determining a countries long-term economic
performance but this is due to the role that geography has in determining institutions.
According to the IMF, institutions can be defined as a formal set of rules and an
informal set of conventions. In the words of Roddick, institutions trumps all else and
is the main determinant of long-term growth. Geography effects the development of
institutions according to Easterly and Levine because of the role climate and disease
has on settler mortality. A country with high rate of settler mortality would not
become a settler state but rather an extractive state. In settler states, those living there
set up stronger institutions than in extractive states where people settled affected the
institutions of that country. Historical institutions were the foundation for todays
institutions and thus effects long-run economic performance according to Acemoglu
et al. Engerman and Sokoloff take this theory even further arguing it was not just
where they settled but how they settled. They argue that geographic conditions
conducive to plantation or slave performed farming lead to inequitable societies.
Moore states that the strength of institutions in a country is dependent on the size of
the middle class. Thus inequitable societies would lead to weak institutions. They use
the example of settlement in the US vs. settlement in the Caribbean.

There is much evidence to support the idea that institutions are the determinants of
long-run economic performance. Hall and Jones use evidence to show that there exists
perfect correlation between the income and social infrastructure. They give the
example of Canada and Zaire. Easterly and Levine take the examples of Burundi and
Canada to support the thesis. Burundi had a high settler mortality rate of 28- per 1000
p.a. which lead to the country being used for extractive purposes only. Canada, on the
other hand had a very low settler mortality rate of just 16 per 1000 p.a. which led to it
becoming a settler state. The evidence exists in the gross income disparities between
the two Canada with an income of over $20000 and Burundi with just $200.
There are some countries do not follow this rule. Politics does have a determinant
effect in the strength of institutions. Russia, a non-extractive state, based in a
temperate climate has suffered low growth performance because of political effects on
institutions. Acemoglu et al use the case of Korea as an example of this. At the time
that Korea split in the 1950s, the two parts had identical geography, institutions,
labour force etc. 50 years later South Korea is a part of the OECD countries whereas
North Koreas income is on par with sub-Saharan Africa. This thus proves that
political upheaval can affect the strength of institutions and therefore long-run
performance. However, looking at the very long-run politics and governments are
relatively short term. Communism in Russia lasted only 100 years and yet despite
poor policies the country is still more economically developed than most tropical
countries. Therefore, whilst politics can affect the economic performance of a country,
this is generally short-term.
In conclusion, the strength of institutions are what determines long-run economic
performance. In the short run these can be affected by politics but in the very long
run, it is geography that determines the strength of an institutions. Geography
determined where and how people settled and thus the social infrastructure they
created. The effects of this are still evident in the patterns of economic development
across the globe and this geography can explain for the most part, economic
performance in the long run.
Examiners Comments
Grade: 73-74
-

this is a pretty good effort

strong and well organized paper.
good grasp of issues here and a nice breath of literature
the institutions part becomes a little confusing but overall very strong

2.1s
There is no agreement on the principal causes of the interwar depression. Outline at
least three different hypotheses. (not all of which need to be mutually exclusive)
The interwar depression, most commonly referred to as the Great Depression,
occurred between the late 1920s (1929 more precisely) and ended up in the 1930s
depending on the country but most generally in 1933. The Great Depression has
been caused by different factors and thus it is a multi-factorial event meaning that
there is no single factor alone that had driven the great depression. We will first
discuss the monetarist view that had the monetary system and monetary policies of
the interwar period as a responsible for the depression. Then we will discuss the
contribution of the fall of the agricultural crisis along with the fall of commodity
prices that, in Keynes view this fall led to the depression since the demand was too
low. Finally it will be discussed the financial crisis, first with the stock market crash
and then the banking panics. These three reasons are not the only factors that drove
the great depression, international payments for example also deepened and worsened
the economic situation of the interwar period.
The monetarist view holds the monetary policies as responsible for the depression and
monetarists argue that the depression could have been only a recession if things had
been handled differently by the Federal Reserve. Milton Friedman claims that the
inaction of the Federal Reserve had negative consequences on the economy and had
had the Federal Reserve managed differently, the depression would not have gone so
badly. The argument here is that at the time, the Federal Reserve was adopting
contractionary monetary policies. This had disastrous effect, since the economy was
experiencing deflation and output contraction was quite severe. According to Milton
Friedman, the federal reserve, instead of setting high interest rates, should have
lowered the interest rates which would have encouraged investment and hence affect
growth. But instead, the Federal Reserve did nothing and thus the depression got
worse. In the same line, some argue that the Federal Reserve used contractionary
monetary policy and high interest rates to stay committed to the Gold Standard. This
view thus holds the gold standard as responsible. While this is much debated, there is
no doubt that the Gold Standard at least played a role in transmitting the depression
throughout the world. Because of the high interest rates, in the US, the other countries
had to keep up with the USA and thus use monetary policy to higher their interest
rates. This had bad impacts on output leading to contractions in output.
The second view is that the Great Depression was caused by demand shocks which
led to lower prices (especially in commodity prices). Keynes holds the demand shock
as responsible. In the interwar period, consumers demand fell dramatically.
Consumers spent less on goods and services and thus suppliers decreased their
production due to the realization of unattended inventories (supply shock). The
decline in demand led to low prices. This had an impact on, for example, commodity
prices which fell a lot. Thus American farmers who had heavily borrowed in the
1920s because of high agricultural prices could not keep up with their repayment of
debts. This impacted on the financial market, contributing to the bankruptcy of many
banks.
Finally, financial crises did help contributing to the worsening of the great depression.
The great depression began in 1929 when the stock market crashed. In the previous
years, the Dow Jones industrial index had been considerably increasing. But in
October 1929, it fell by very much. But this was not systematically followed by

banking panics. It is only in 1931 that a banking panic occurred in the USA but it was
expected to recover soon. However, bad news came from Europe where there had
been also banking panics (France, Germany).
Because of the agricultural crisis and because of the depression in Germany, Latin
America and Germany who had heavy debts started defaulting on debts. These debts
had to be repaid to France, UK and US. So the default of these countries made things
even worse.
Many other causes played a role in the great depression, due to limited time they
wont be discussed, but an example of this could be the rise of protectionism (e.g.
Smoot-Hawley Act tariff in the US). Moreover, these causes interacted with each
other.
As a conclusion, monetarists view the great depression as a result of contractionary
monetary policy and inaction for the Federal Reserve. The gold standard also helped
in transmitting the depression from the US to the rest of the world. Keysianists blame
the great depression on demand shocks. Demand shocks led to a decrease in
production but also to lower prices. This had an impact on agricultural prices which
led to some extent to the agricultural crisis. Finally, the stock market crash which
generated the depression and the banking panics worsened the economic situation.
However, we must take into account that some causes interacted leading to further
depression and that other factors caused the depression such as the role of
employment (with increase of wages, decrease in hours worked, higher benefits for
unemployment etc.) and international payments.
Examiners Comments
Grade: 68
-

a detailed and valid attempt to answer the question

well written and structured
needs more analysis of the two second model
part on gold standard can be furthered by looking at the macro-economic
trilemma

What successes did Import Substitution Industrialisation bring to "peripheral"

nations?
The 1920s were bad years in general but especially for the Third World. Peripheral
nations suffered from trade slump, fall in investment and debt crisis. All these things
together led to Import Substitution Industrialization. The question left is what
successes did this bring? This essay argues that the successes brought by Import
Substitution Industrialization are limited to the beginning of industrialization for some
peripheral countries, while others were unable to begin or simply continued in the
process of industrialization. The ensuing paragraphs outline the basic scenario of the
1920s for peripheral nations and then explains the positive and negative consequences
of adopting import substitution industrialization.
Depression in the periphery was worse than in many countries. This can be partly
argued on the basis that they started off in a worse position. Fall in commodity prices
were a result of the inelastic supply of agricultural products, the introduction of
mechanized farming, stocks kept by farmers in the hopes of higher future prices and
the fact that European agricultural production had recovered from WW1. All these
factors coupled together ensured that prices of agricultural products fell. Increased
supply was not met by demand and as a result international trade volumes of
commodity goods fell as well. Most of these countries were dependent on one or two
products. For example, Brazil was dependent on coffee exports. It was also true that
most of the dependent on one or two countries in terms of their exports. The US was
responsible for nearly half of Chiles exports. With the depression, the US went into a
recession, buying less products from abroad and becoming protectionist. Fall in
demand coupled with fall in price reduced peripheral revenue.
This decline in revenue caused by a trade slump together with a fall in investment
(since other countries were also suffering from the depression) resulted in their
inability to pay their debts. Knowing that loan funds had been depleted and that
lenders were individual bondholders with no bargaining power, periphery countries
decide to default and resort to Import Substitution Industrialization to maintain their
economies.
This forced peripheral nations to industrialize. For most part, they focused in the
production of cement and other construction materials, textiles and processed food.
Large countries such as Brazil and countries with an autonomous public sector such as
Costa Rica and Uruguay were more opened to reforms. Reactive countries fared better
than the majority. Egypt instituted a Cotton Research Board and improved
productivity in textile production. By gaining tariff autonomy, it was able to build up
protectionist barriers and protect its infant industries. It also made better use of
fertilizers.
For a number of peripheral countries including Brazil and Egypt, Import Substitution
Industrialization was the beginning of industrialization and as such it presented a
success. It proved the (forced) maturity of peripheral nations as capital and labor were
directed from agriculture to industry. For a number of nations, however Import
Substitution Industrialization in the Depression was rather a continuation of
industrialization. Chile had begun to industrialize during WW1. And for a final group,
this period did not present the beginning of industrialization. Cuba did not have the
resources required for industrialization and as such it was unable to industrialize in
this period. The Philippines is another example of failed industrialization. Its reliance
and dependence on the US throughout the Depression meant that it never had to

minimize its imports and resort to Import Substitution Industrialization. Secured

exports to the US supported Philippino economy.
Having noted the limited definition of success in relation to Import Substitution
Industrialization the essay now turns to the many disadvantages and failures of this
approach to peripheral nations. As countries were forced to industrialize, they chose
areas in which they had no comparative advantage. Coupled with protectionist
barriers, this meant that consumers in peripheral countries were paying higher prices
for lower quality equivalents (of goods produced in other nations). This ensured the
inefficient allocation of resources. By redirecting capital and labor to less efficient
industries that price of capital rose in periphery countries. This pushed investment
even further and decreased competition. All in all, Import Substitution
Industrialization presented peripheral nations with more failures than successes.
In general, the years following the Depression showed a world that was largely
characterized by inefficient allocation of capital and labor due to Import Substitution
and protectionism. What followed were trading blocks and exchange constraints. In
the future much would be done to avoid a similar scenario than the Depression. For
peripheral nations, this was presented as the renegotiation of debt in 1980s
accompanied by improvements in fiscal discipline, trade and financial liberalization,
deregulation, institution of property rights, privatization, tax reforms, public
expenditure priorities, foreign direct investment and exchange rates.
The 1920s brought much grief to peripheral nations. As volume and prices of
commodity goods fell, investment plummeted and the debt crisis emerged the Third
World resorted to Import Substitution Industrialization. For some it was the beginning
of industrialization and thus the beginning of a structural transition to a more mature
state of the economy. However, what this method mostly brought were failures by
forcing peripheral nations to redirect labor and capital to industries in which they had
no comparative advantages; by building protectionist barriers; and by forcing its
consumers to purchase lower quality and higher priced goods.
Examiners Comments
Grade: 60
-

a reasonable basic survey that covers the main issues but offers little depth of
analysis, consideration of the literature or critical argument.
Solid but not impressive
Need to demonstrate a clearer analysis of ISI in practice

2.2s
To what extent does geography explain long run economic performance?
Geography is a vital component in determining economic performance. It can affect
growth both directly and indirectly but ultimately economic growth in the long run is
strongly determined by geography.
Firstly, physical geography is an important aspect to consider. This aspect
encompasses factors such as climate and disease. Climate plays a key role in
determining the comparative advantage of a country, for example, Barbados climate
is ideal for sugar production. This affects the countrys balance of payments which is
a key factor which must be considered when determining long run economic growth.
The prevalence of disease is key in affecting economic performance as it has
implications for the economys labour force. In Africa, for example, where there is a
prevalence of diseases such as malaria and AIDS/HIV, sickness rates and mortality
rates are high and as a result, the countrys workforce is adversely affected. Labour
force size decreases with higher rates of mortality and productivity is affected by high
sickness rates. On the flip side, the deteriorating health of human capital also places a
burden on the countrys social infrastructure such as its health provision and so results
in an increase in costs. This scissor effect has huge implication on an economy and
demonstrates the impacts of disease on economic performance.
Physical geography also determines the size of an economy as an unfavourable
physical geography can lead to areas with no substantial human settlements such as
Siberia and Antartica. However, this aspect of geography explains long run economic
performance of a select number of areas and places heavy emphasis on extremes such
as countries with low diseases and high diseases. The indirect effects can be applied
more broadly and those effects are less succinct.
However, aside to direct factors, there are also indirect factors involving institutions.
It is argued that historically, geography affects the quality and number of institutions.
A country with high mortality rates for example will attract less settlers and thus
institutions are of low quality. This means that governments are less responsible and
an ineffective legal system etc. as a result of these low quality institutions, economic
growth in the long run is difficult to sustain as factors such as well-defined property
rights are essential for strong long term economic growth. Conversely, countries
where there is low mortality often have increased number of settlers which often
result in high quality institutions were governments are run effectively and social
infrastructure is efficient.
With good quality institutions such a government there is less corruption which can
seriously harm the development of an economy. With corruption there is a
misallocation of resources and thus an economy cannot achieve allocative efficiency.
Markets are distorted and the economy is not operating at efficient levels. There is
also less desire or capability for a government to run with a clientist or despotist
approach whereas in countries with poor institutions, this is prevalent. For example, in
Zimbabwe, Robert Mugabes leadership approach could be argued to be clientist
which is to say that it is about distributing the pie in your favour and not about
increasing the pie.
Education is a social infrastructure that may be compromised as a result of poor
quality institutions. This would be especially harmful as the skills of the labour force
are of paramount importance in determining long-run economic performance. With a

low skilled labour force, there is a low human capital and thus, economic performance
is limited to the capability of its work.
Geography also determines the style of production within an economy. For example,
in Africa where human capital is high the use of slaves was increasing and thus
resulted in an economy with few elite at the top who had the majority of the capital
and slaves performing low skill tasks. This in contrast with other economies which are
based on a capital intensive production and thus require less human capital, resulting
in an economy with everyone owning a share of the capital.
Geography can also have effects on public infrastructure such as roads which can
affect economic performance. This reduces transport and access to markets which can
have stifling effects on economic performance. This can be observed in Africa where
provision of rail transport is severely lacking, being only 7% as dense as India. As
Africa shows, physical geography affects can have disastrous effects on the economy.
As Africa is landlocked, it suffers from poor access to trading routes which ultimately
have adverse effects on Africas trading capacity and therefore, trading hubs are
mostly dispersed and localized.
However, there are other factors to consider. An aspect that is completely separate to
geography is the method of governing a country. Historically free market economics
have experienced success whilst communist planned economies have failed. The
choice between leadership styles is a crucial one in determining long run economic
performance and one that is independent of geography.
Nevertheless, geography does play a large role and encompasses a whole range of
determinants especially when one considers the indirect effects of geography. Overall
there is much reason to analyse the importance of geography as it plays a vital role in
determining long run economic growth.
Examiners Comments
Grade: 52-53
-

Not the best you can do: needs clear and factual example
Weak in context and argument, tends to be off topic
Shows some sense of the main points in outline but riddled with errors and
lacking in a sound grasp of the implication of the debate

What successes did Import Substitution Industrialisation bring to "peripheral"

nations?
Import substitution industrialization is defined as industrialization done behind high
barriers to trade. It is done to make the exports of a country more competitive by
industrializing the domestic economy and protecting it from foreign imports. After the
1930s Latin American debt crisis, during which Latin American countries defaulted
on their debts, they practiced import substitution industrialization. This was done
because of high U.S. protectionism especially towards Latin America, thus the
economy had no choice but to enforce it. Peripheral nations refers to those nations
that do not play the lead role in the world but are affected by the reactive nations
policies. Import substitution could be advantageous or disadvantageous to them
depending on how rigorously they follow it.
Countries that adopted ISI were Brazil, Egypt, Ghana, Philippines. The idea behind it
was to make their goods more competitive in the world market and also become
independent from the world economy. According to the Prebisch-Singer hypothesis, a
country would never have a favorable terms of trade unless they do ISI and widen
their export base to manufactured goods rather than just primary goods. Thus ISI was
necessary for peripheral countries as their exports mostly consisted of primary
produces. Brazils major export was coffee which was highly risky thus it enforced
ISI. Moreover, it could also be favorable for the balance of payments as exporting
manufactured goods and importing primary goods would mean that exports were
greater than imports and a surplus in the balance of payments.
Brazil was a coffee producer and its major export market was the U.S.. Thus after the
depression, Brazil had to did ISI in pig-iron, steel and cement industries. Industrial
output increased by 40% and total factor productivity also increased. There was
inflow of technical know-how. And domestic firms replaced foreign firms, which
increased costs as they did not have experience economic of scale. ISI was
advantageous for Brazil as domestic competition did increase. Egypt, too practiced
the same policy for the alcohol, cigarettes and cement industries and it proved to
beneficial for Egypt as well since its terms of trade improved and it became fairly
self-sufficient in these industries.
However, ISI was not quite successful in the Philippines. Philippines enforced it on
the cement and textile industries. However, corruption was quite rampant in the
Philippines, which hindered its success. Moreover, Ghana was another country whose
ISI failed due to the same reason. An important factor for its success is that there
should be no corruption and monopolies should not be formed because then maximum
benefit is not enjoyed by the consumers. Moreover ISI also increases the inflow of
capital goods into the country, since they are required to produce goods domestically.
A balance of payments surplus will then mean that they can import goods that they
need.
Therefore, ISI was beneficial to some countries and not to some. Making exports
more competitive in the international market, increasing domestic competition and
improving the terms of trade, were the few benefits that it brought.
Examiners Comments
Grade: 53-54
-

limited understanding

summary of few cases that offer a superficial review of benefits without much
detail and without any real sense of the costs incurred