Industrial Policy

In the 1990s, development policy advocated by international financial institutions was influenced by Washington Consensus thinking. This strategy, based largely on liberalization, privatization, and price-stability, down-played, if not disregarded, the role of government in economic planning. With the exception of the Far East, many developing countries adopted the view that industrial policy resulted in inefficiency and poor economic growth pervaded.

Although the term industrial policy has earned a poor reputation in the past, this prescription has been successfully employed in what are now some of the most vibrant emerging markets. India, China, Brazil, and many other NIE Asian countries nurtured technology intensive industries to jumpstart their telecom, online, and export industries. They have had remarkable success not only in boosting economic growth, but also in diffusing the benefits of technology led growth—including research and development, high tech skills, and education—to other sectors in their economies.

These examples show that industrial policy does work, when the right industries are supported and when commerce has large spillovers, such as labor force education and training, employment generation, and useful research and development outputs. This Task Force explores what industrial policies have been successful and the risks and trade-offs associated with these microeconomic approaches to growth and development.