Question: Explain the concept of industrialisation by invitation and import substitution industrialisation.

In 1937 there was a series of labour riots throughout the British West Indies and the Moyne
Commission of Inquiry was set up to investigate. Sir Arthur Lewis made a submission before the
commission and made a case for dismantling the agricultural sector and creating a manufacturing sector
to operate alongside a modernized agricultural sector. Lewis argued that the continued specialisation in
agriculture was producing an increased labour force to work the same area of land therefore the
productivity of labour was zero and the agricultural exports were not benefitting from the growth of
income in the metropolis.

Arthur Lewis proposed the creation of a manufacturing sector which would shed labour from the
agricultural sector. Such a labour transfer would permit the introduction of new technology including
equipment in the agricultural sector. Since Caribbean countries were poor, Arthur Lewis proposed that the
goods being manufactured be targeted for export to the metropolitan countries. It was proposed that
foreign investors be attracted by generous incentives to establish these manufacturing enterprises. Lewis
envisioned that the foreign investors would bring knowledge of management, technology and of export
markets and over time, this knowledge would be transferred to the employees who wold be of the region.
Eventually the West Indians would be able to assume ownership of the export manufacturing enterprises
either via acquisition or new investments.

Import substitution industrialisation is a policy which encourages the growth of domestic

industries frequently using tariffs and non-tariff measures. The main objective of this strategy is to
encourage the production of goods that were previously imported so as to minimise the dependence of
imports. The domestic industries are protected from foreign completion and are encouraged to grow. The
‘infant industry’ is protect for some time until it can compete internationally. This is achieved by several
means: using tariffs, import quotas and subsidies, creation and ownership of firms by the state, attracting
multinational corporations to produce locally, shifting capital and labour to the manufacturing sector and
encouraging high wage rates.