Self-interested elite responses to either adversity or new opportunities in the world economy enhanced popular classes’ capacities for struggle. Elite efforts to modernize their economies, through industrialization or the promotion of agro-industrial exports, provided the foundations for working-class and peasant militancy. Absent these programs, the structural and organizational backbone of the classical left would not have acquired the power it did.

The process was initiated by the Great Depression. In the larger economies, mainly in South America, the ruling class confronted shrinking trade, and then the turmoil of the war years, by adopting an inward-oriented development model known as import-substitution industrialization, or ISI. For ruling classes in these countries, the global crisis undermined profit strategies based on traditional commodity exports. Trade restrictions in traditional markets and declining export revenues caused financial havoc and sharply reduced their ability to import manufactured goods. This loss of externally produced manufactures persuaded states to turn to the development of local industry. The state created incentives for domestic business to invest more heavily in local industry, which had been slowly developing since the turn of the century. This new economic strategy had the added benefit of giving political elites more bargaining power in the global state system as their economies expanded and deepened their industrial base.