chang-2013-industrial-policy-can-africa-do-it.pdf - 2.2 Industrial Policy Can Africa Do It?1 Ha-Joon Chang2 University of Cambridge 2.2.1 Introduction

chang-2013-industrial-policy-can-africa-do-it.pdf - 2.2...

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114 2.2.1 Introduction After over three decades of ideological grandstanding, the debate on (selec- tive) industrial policy is finally inching toward more pragmatic discussions on how to design and implement it – this and other conferences organized by the IEA this year being the best examples of such discussions (for a review of the industrial policy debate since the 1980s, see Chang, 2011). Gone is the dominance of the view that markets work more or less well and that therefore there are very few justifications for industrial policy. In the last decade or so, there has been a revival of the infant industry argu- ment in various guises (Chang, 2002; Shaffaedin, 2005; Greenwald and Stiglitz, 2006; Dosi et al. (eds), 2009). Even among the more orthodox economists, there is an increasing acceptance that there are many types of market failures that need to be addressed through industrial policy – not just the more conventional ‘externalities’ problem but also economies of agglomeration and coordination failures (Lin’s interventions in Lin and Chang, 2009; Lin and Monga, 2012). There has also been a significant change in the reading of the evidence on industrial policy. There is a growing recognition that industrial policy is not some highly idiosyncratic practice found only in East Asian ‘miracle’ economies (Japan, South Korea, Taiwan, and Singapore). Now it is increas- ingly accepted that most of today’s rich countries used at least some industrial policy, especially trade protectionism, when they were catch-up economies themselves (Bairoch, 1993; Chang, 2002 and 2007; Reinert, 2007). Some econometric studies have even identified a positive correlation between protectionism and economic growth in the late 19th and the early 20th century (O’Rourke, 2000; Vamvakidis, 2002; Clemens and Williamson, 2001; Irwin, 2002, provides a criticism of these studies, which is then countered by Lehmann and O’Rourke, 2008). In particular, the exposure of Britain and the USA – conventionally considered the home of free market and free trade policies – as the pioneers of infant-industry promotion through protectionism 2.2 Industrial Policy: Can Africa Do It? 1 Ha-Joon Chang 2 University of Cambridge J. E. Stiglitz et al. (eds.), The Industrial Policy Revolution II © International Economic Association 2013
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Ha-Joon Chang 115 and other forms of industrial policy has added a whole new complexion to the history of capitalist development. The practice of infant industry promotion was first systematically applied by Robert Walpole, the British Prime Minister of 1721–42, and the theory was invented by Alexander Hamilton, the first US Treasury Secretary, in his report to the US Congress in 1791 (see Chang, 2002, for further details; Hamilton’s original report is Hamilton, 1791). There is also a more nuanced interpretation of the industrial policy experi- ences of non-East-Asian developing countries during the import-substitutiin industrialization (ISI) period. The role of industrial policy in the significant economic progress made by many Latin American countries between the
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