Date of Award


Document Type

Honors Thesis (Colby Access Only)


Colby College. Global Studies Program


Patrice M. Franko

Second Advisor

Jan Hogendorn

Third Advisor

Ken Rodman


This thesis is an attempt to shed some new light on the subject of economic development policies. In recent years there has been a notable change in the methods that developing countries are using to improve their performance. The dependency theory with its policy prescription of Import Substitution Industrialization (lSI) has been rejected, and most developing nations are once again returning to the policies of economic liberalization and market orientation. However, developing nations are now adding a new "twist" to this traditional development model, economic integration. This argument will first be developed in the context of the macroeconomic developments resulting from Spain's accession into the European Community (EC) in 1986. It will demonstrate the results of the external constraints that have been placed on policy making in Spain, based on selected macroeconomic indicators. Secondly, based on Spain's experiences with economic integration, the case of Mexico and the North American Free Trade Agreement (NAFTA) will be examined. Although there are clear differences between these two case studies, the case of Spain provides important insights regarding the external constraints that Mexico will face with the NAFTA, and the effects that these constraints will have on Mexican macroeconomic policy making. Before the analysis of the Spanish and Mexican case studies can begin, it is important to establish the theoretical development policies that have led to the emergence of a new development policy involving economic integration. Beginning in the late 1940's, Spain, Mexico and many other developing countries began to implement a process of industrialization called import substitution industrialization. This policy was the direct policy prescription of the dependency theory. The eventual exhaustion of this model led to a period of crisis, at different times, in both Spain and Mexico. It was during the recoveries from Spain and Mexico's respective crisis' that they returned to the traditional development model of export orientation and economic liberalization, but this time with the addition of economic integration. The following two sections describe in more detail the dependency theory, the traditional "orthodox" development policies, and the theory of economic integration. It is then demonstrated how the traditional "orthodox" policies have been modified to include economic integration. The following theoretical section is not intended to be an exhaustive discussion on the topic, but rather it will set the stage for the case studies of Spain and Mexico that follow.


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Macroeconomics, economic integration, developing economies, Spain, Mexico, Dependency Theory, ISI