Did Lewis’ theory of “industrialization by invitation” (IBI) lead to some of the social, economic and financial problems being experienced in the region? Discuss your response. Lewis’ theory of “industrialization by invitation” made a case for the possibility of the creation of a manufacturing sector in the islands in the region, contrary to the ideas proposed by the Moyne Commission.
With the overpopulation of the islands, Lewis argued that non-agricultural employment opportunities were required and he saw the manufacturing industry as a means of achieving this goal. Using the theory of comparative cost, Lewis felt that industrialisation would be a viable option for the West Indian islands. He noted, however, that given the fact that that locals lacked adequate knowledge and were relatively inexperienced in this new endeavour, there would have to be a temporary reliance on foreign investors.
To attract them, local governments would have to play a very active role by offering various incentives and setting up Industrial Development Corporations. Lewis based his model on Puerto Rico’s Operation Bootstrap. (Rose, 2002) states that by “early 1960’s the MDCs and some of the LDCs in the region had established the institutional and legal apparatus to accommodate the industrialization development strategy. ” There was also an influx of “foreign capital and visible light manufacturing industries” (Rose, 2002).
It would seem, therefore that Lewis’ theory was successful since some economic growth was seen by the MDCs. Be that as it may, closer examination would reveal that the smaller islands did not fare as well in their attempts at industrialization. In fact, even with the success of the MDCs, industrialization by invitation achieved negative results. This was because most of the industries developed as a result proved to be capital intensive rather than labour intensive, thus unemployment rates remained high.
The increase in rural to urban migration and the social and political tensions experienced did nothing to improve the situation. The foreign investors did not, as Lewis envisioned, offer sufficient training and assistance to the locals. Instead, they maintained close ties with their own countries and the region was now swept up in yet another cycle of dependency. Consequently, the implementation of Lewis’ strategy can be seen as having some effect on some of the social, economic and financial problems experienced in the region.
The fact remains that the countries in the region were forced to compete against each other for foreign investment thus undermining any previous attempts at integration, a situation which still exists today. Lewis’ strategy must not be thought of, though, as being wholly accountable for the region’s problems. In part, this can be seen to have arisen because the region’s governments, in implementing Lewis’ strategy, failed to take into account Puerto Rico’s close ties with the United States and their privileged access to the U. S. markets.