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What's new in the new industrial policy in Latin America ?

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  • Devlin, Robert
  • Moguillansky, Graciela
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    Abstract

    Latin America was an aggressive practitioner of industrial policies (IP) in the years 1950-1980. During much of the period the general practice was in line with the then mainstream thinking in development economics. Significant growth, industrialization and modernization took place, but serious flaws in concept and execution of the IP caused them to fail as a vehicle for economic catch-up with rich countries in an era of an expansive world economy. A very serious Latin American external debt crisis in the 1980s, coupled with the ascendance in international discourse of arguments for retrenchment of the State in economics and life, contributed to a pendulum swing in the region to the policies of the so-called Washington Consensus. Major structural adjustments and reforms designed to bring the free market forward and push back the market governance of the State dominated the 1980s and 1990s. In recent years, however, countries in Latin America have witnessed a renaissance in the deployment of systematic IP. This paper explains why IP have emerged and why they are a necessary step for the more profound structural change needed to drive sustained high rates of growth. Based on illustrated cases which we think reflect the current state of affairs in the region, the paper highlights the nature of the shift to a more proactive state promotion of industrial and services upgrading, as well as the important new characteristics of the current outbreak of IP which are different from the ones of the past and offer hope for greater success. It also identifies a legacy of some bad habits which linger and need to be addressed with urgency if the new trend is to be successfully consolidated.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6191.

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    Date of creation: 01 Sep 2012
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    Handle: RePEc:wbk:wbrwps:6191

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    Related research

    Keywords: Public Sector Corruption&Anticorruption Measures; E-Business; ICT Policy and Strategies; Climate Change Economics; Economic Theory&Research;

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    1. Arturo Galindo & Carlos Scartascini & J. Mark Payne & Robert Daughters & Alberto Melo & Koldo Echebarría & Eduardo Lora & Gabriel Filc & Alejandro Micco & Alberto E. Chong & Ugo Panizza & Juan Benavi, . "The State of State Reform in Latin America," IDB Publications 59578, Inter-American Development Bank.
    2. Mario Cimoli & Giovanni Dosi & Joseph E. Stiglitz, 2008. "The Political Economy of Capabilities Accumulation: the Past and Future of Policies for Industrial Development. A Preface," LEM Papers Series 2008/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Stijns, Jean-Philippe C., 2001. "Natural Resource Abundance And Economic Growth Revisited," Berkeley Economics Dissertations-in-Progress Series 25127, University of California, Berkeley, Department of Agricultural and Resource Economics.
    4. Philippe Aghion & Mathias Dewatripont & Luosha Du & Ann Harrison & Patrick Legros, 2012. "Industrial Policy and Competition," NBER Working Papers 18048, National Bureau of Economic Research, Inc.
    5. Eduardo Lora, 2007. "The State of State Reform in Latin America," World Bank Publications, The World Bank, number 6642, October.
    6. Manuel R. Agosin & Christian Larraín & Nicolás Grau, 2010. "Industrial Policy in Chile," IDB Publications 67218, Inter-American Development Bank.
    7. Erik S. Reinert, 2009. "Emulation versus Comparative Advantage: Competing and Complementary Principles in the History of Economic Policy," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 25, TUT Ragnar Nurkse School of Innovation and Governance.
    8. Chang, Ha-Joon, 1993. "The Political Economy of Industrial Policy in Korea," Cambridge Journal of Economics, Oxford University Press, vol. 17(2), pages 131-57, June.
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