Industrial Policies

Cherif, Reda and Fuad Hasanov. “The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy.” IMF Working Papers, March 26, 2019. https://www.imf.org/en/Publications/WP/Issues/2019/03/26/The-Return-of-the-Policy-That-Shall-Not-Be-Named-Principles-of-Industrial-Policy-46710.

“This pointed out that while strategic policy intervention was widely viewed as a key reason for the east Asian economic miracle, it had a ‘bad reputation among policymakers and academics’—so much so that, from the 1970s onwards, the phrase was rarely mentioned in polite company, or by the IMF”

“Last month the fund reported that it had observed no less than 2,500 industrial policy actions around the world in the last year alone, of which ‘more than two-thirds were trade-distorting as they likely discriminated against foreign commercial interests’”

“last year’s surge was ‘driven by large economies, with China, the EU and the US accounting for almost half of all new [industrial policy] measures’”

“‘industrial policy’ can mean many different things”

“there is an important difference between policies that try to create growth by shielding domestic companies from foreign competition and those which help those companies compete more effectively on the world stage”

“Cherif and Hasanov argue that import substitution models undermine growth in the long term since they create excessively coddled, inefficient industries”

“the second variant of industrial policy aims instead to make industries more competitive externally in an export-oriented model, while worrying less about imports. This approach is what drove the east Asian miracle, and is what creates sustained growth, the data suggests”

Juhász, Réka, Nathan Lane, and Dani Rodrik. “The New Economics of Industrial Policy.” Draft, Annual Review of Economics, August 2023. https://drodrik.scholar.harvard.edu/sites/scholar.harvard.edu/files/dani-rodrik/files/the_new_economics_of_ip_080123.pdf.

“while ‘industrial policy has traditionally focused on manufacturing’, it is the service sector that now dominates. Thus ‘governments are likely to look beyond manufacturing as they consider productivity-enhancing “industrial” policies in the future’”

“insofar as western politicians are now increasingly happy to utter the once forbidden words ‘industrial policy’, they need to define what they mean”

“Is the goal to exclude competitors from the domestic stage, via tariffs? Or to make domestic producers more competitive and innovative in a global sense and better able to compete? Or is it something else?”