20100203 IP - Industrial Policy in Action - its nature and...

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Industrial Policy in Action - its nature and cases in the Era of Globalization 2010 1
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Prefatory Remarks Industrial policy is important. It has played a role in the rise as an industrial power by America, Japan, and also the Asian NIEs. By Professor Okada of Japan, what allowed America to regain industrial supremacy from Japan in the 1990s is due to the Sematech program, resembling what is known as industrial policy, but not under that name. In addition, the recent Chinese economic growth may be said as the result of industrial policy even though the situation is complicated by the partial devolution of economic policy making in post – 1978 China to local governments. Industrial policy is one of the most misunderstood topics in economics from its nature to its origin and name. In practicing industrial policy, many countries are like Moliere’s Monsieur Joudain, speaking prose for forty years without ever knowing it. As an Introduction, the discussion here centers on the significance of Industrial Policy in the Era of Globalization: the WTO-GATT regime offers new policy opportunities, but also renders old instruments inapplicable. To provide unity for subsequent treatment, a brief, conceptual discussion is in order about basic issues of Industrial Policy: whether , why , and how should the State play a role on inter-sector growth of an economy. For context, one turns to the question: what light the historic evolution of this subject can shed. The main body of this discourse comes next: the structured review of selected case studies, from several alternative angles - the stage of development the size of the economy various sectors in the economy, industrial structure and related issues of education and research/development. Some concluding remarks are offered concerning possible directions for future research. 2
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Part I Introduction Not only the wealth, but also the independence and security of a country appear to be materially connected with the prosperity of manufactures. Every nation, with a view to these great objects, ought to endeavor to possess within itself all the essentials of national supply. Alexander Hamilton, Report on Manufactures , December 5, 1791 1. Motivation All developed economies today are either industrial or post-industrial economies; no economy specializing in primary good production can claim to be fully developed . It is only natural that in the less developed world, today, there is a generally-held belief that exporting industrial product is both the mark of progress, and the indispensable means to achieve development. Looking back to the words of Hamilton two and a quarter of a centuries ago, ..... plus ça change , plus c'est la même chose . At the same time, in many human pursuits, practice makes perfection. To purchase domestic
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This note was uploaded on 04/29/2010 for the course ECON 4450 taught by Professor Wan during the Spring '09 term at Cornell University (Engineering School).

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20100203 IP - Industrial Policy in Action - its nature and...

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