Bringing the Structure Back in: Limited Access Orders, “Extreme” ISI and Development*

Abstract

Structuralists highlighted politico-economic constraints on late development and advocated infant industry policies. In practice, highly distortionary implementation choices were near ubiquitous. Why did policymakers prefer this extreme policy? Employing North, Wallis & Weingast (2009), I argue politicians were constrained by a limited access order (LAO) to directly distribute production rights to powerful groups. “Extreme” ISI policies maximized politicians’ ability to directly distribute production rights; a milder policy meant replacing state-conferred rights with market mechanisms. I review representative “extreme” policies in Brazil, Chile and India, and then demonstrate their political efficacy in diversifying production rights that could be directly exchanged for elite support. Finally, I discuss the argument’s consistency with early structuralist emphasis on underlying politico-economic conditions as impediments to growth.