ABSTRACT
The decline and exhaustion of import substitution is the result of a complex and dynamic political process which both feeds upon and accentuates import substituting industrialization’s (ISI) inherent weaknesses. The protectionist aspects of ISI lead to economy-wide distortions, distortions that also create extraordinary gains for those involved in import substitution. The pursuit of economic rents and the resulting distortion of "economic behavior" has far-reaching implications for the private sector itself and for its relations with other forces in society. The extra economic gains derived from government intervention in the workings of the market system are "economic rents." At the root of the politicization of economic decision making lies economic rents. The state finds itself trapped among the different private sector groups vying for the economic rents, a fact which undermines its autonomy. The stage is set for furious party rivalries and party-private sector clashes that ultimately serve to paralyze the political system and deny the state its autonomy.
