13.pdf - The Role of Industrial Policy in Developing Countries 67 THE ROLE OF INDUSTRIAL POLICY IN DEVELOPING COUNTRIES Robert H Wade Abstract The

13.pdf - The Role of Industrial Policy in Developing...

This preview shows page 1 - 3 out of 14 pages.

67 The Role of Industrial Policy in Developing Countries The voices gathered against “industrial policy” in the economics profession have long achieved a choral force. For Nobel laureate Gary Becker, “the best industrial policy is none at all” (1985). For John Williamson, crystallizer of the Washington Consensus about appropriate development policy, “little in the record of industrial policy suggests that the state is very good at ‘picking winners’” (2012: 10). For Lawrence Summers, former chief economist of the World Bank, Treasury Secretary of the United States, presently professor of economics at Harvard, government “is a crappy VC [venture capi­ talist]” (quoted in Nocera 2011). For The Economist magazine, “the government has a terrible record of picking winners” (2011). For William Easterly, ex­World Bank economist and currently professor of economics at New York University, “[t]he track record of dictators picking winners is very poor, so why are we so sure that this factor contributed to the success of the Gang of Four [East Asian tigers]?” (2009: 129). An interviewer pressed him on how he reconciled his faith in free markets with evidence that the typical developing country had better economic performance in the 1960s and 1970s, when governments intervened more, compared to later, when governments inter­ vened less: “It is a bit of a mystery why they did well ... the growth had a lot of mystery for me ... It is mys- terious to those who advocate hands­off markets.” (Easterly, 2002: 91, emphasis added). THE ROLE OF INDUSTRIAL POLICY IN DEVELOPING COUNTRIES Robert H. Wade Abstract The voices raised against industrial policy in the economics profession have long achieved a choral force. However, historical evidence suggests that the public authorities of virtually all of the small number of non-western economies that achieved “developed” economic status in the past two centuries have used industrial policy to impart directional thrust aimed at catching up with western economies. Since the 2007–2008 financial crash and ensuing long slump, minds have become somewhat more open to this evidence as the realization dawns that western countries themselves have to restructure their production structure beyond the limits of let the market decide . This chapter argues that the classic developmental State is only viable today for a very small number of countries with large domestic markets. However, a variant of the developmental State can still be viable. The chapter spells out necessary features of the encompassing political settlement and the industrial policy agency itself. It ends on the note that developing country policy makers should be cautious about accepting mainstream economists’ blanket negatives about industrial policy. Introduction
Image of page 1
68 Rethinking Development Strategies after the Financial Crisis – Volume I: Making the Case for Policy Space By this time, Easterly had been analysing development issues for 21 years, most of them in the World Bank.
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 14 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes