Notably, this approach supported the use of so-called import-substitution policies, which call for the government to protect domestic manufacturers from foreign competition in order to promote industrialization and reduce dependence on commodity exports. In practice, the application of this approach involved extensive government intervention in the economy, including the provision of subsidies to firms and heavy protection and regulation of industry.
The outsized role of the government in the economies that pursued the import substitution strategy, together with relatively narrow tax bases and inefficient tax collection, led to chronic fiscal deficits and pervasive economic inefficiency in the protected industries. Importantly, structuralism placed little weight on monetary factors in explaining inflation.