Is The Industrial Policy Relevant In The 21st Century?
Abstract The purpose of this paper is to examine whether industrial policy has any place in industrialization and economic development of developing countries in the new world economy. The author argues that the answer to this question depends on the development objective of the country and the role envisaged for international trade. If the role of international trade is to achieve the objective of the integration of developing countries into the world economy purely for the sake of integration, the industrial policy is irrelevant. By contrast, if development is the ultimate objective of their integration to the world economy, what is irrelevant is the current dominate economic philosophy and the international rules which govern trade and development. Such rules facilitate globalization but they are not particularly conducive to industrialization and development of developing countries. We have been witnessing two contradictory developments in the world economy and international policy during recent decades. On the one hand, the need for sophisticated trade and industrial policies has increased; on the other hand the economic philosophy has changed against government intervention in the economy. The need for industrial policy has increased because the international market has become increasingly more concentrated; global production, international trade and technology have become more and more dominated by TNCs; technological changes have accelerated and production has become more knowledge-intensive. The policy space of developing countries has, however, shrunk due to the dominant views of the orthodoxy. Such views have been reflected on the conditionalities, imposed on many developing countries by International Financial Institutions (IFIs), bilateral donors and to a large extent through GATT/WTO rules and advocacy of “Washington Consensus”. Meanwhile the across-the-board and universal trade liberalization implemented by most developing countries during recent decades has failed after the failure of across-the-board import-substitution of the preceding decades. Such failures have put trade policy as well as trade diplomacy at the cross-roads. The failures of the top-down approach to trade and industrial policies through which one size-for-all rules are drawn at he international level and imposed on developing countries raises a serious question: is not there a need for rethinking trade and industrial policies? After arguing for the relevance of industrial policy, the author presents an alternative framework by taking a bottom-up approach in this study. He presents a relevant framework for what is required at the national level to catch- up in the process of industrialization and development and, and on this basis, he argue briefly for changes in international trade rules to make them development oriented.
|Date of creation:||20 Mar 2006|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Romain Wacziarg & Karen Horn Welch, 2008.
"Trade Liberalization and Growth: New Evidence,"
World Bank Economic Review,
World Bank Group, vol. 22(2), pages 187-231, June.
- Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
- Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc.
- Kellman, M, 1983. "Relative Prices and International Competitiveness: An Empirical Investigation," Empirical Economics, Springer, vol. 8(3-4), pages 125-138.
- Grether, Jean-Marie, 1999. "Determinants of Technological Diffusion in Mexican Manufacturing: A Plant-Level Analysis," World Development, Elsevier, vol. 27(7), pages 1287-1298, July.
- Mehdi SHAFAEDDIN, 1998. "How Did Developed Countries Industrialize? The History Of Trade And Industrial Policy: The Cases Of Great Britain And The Usa," UNCTAD Discussion Papers 139, United Nations Conference on Trade and Development.
- Kaldor, Nicholas, 1972. "The Irrelevance of Equilibrium Economics," Economic Journal, Royal Economic Society, vol. 82(328), pages 1237-1255, December.
- Singh, Ajit, 2003. "Special and Differential Treatment, The Multilateral Trading System and Economic Development in the 21st Century," MPRA Paper 24653, University Library of Munich, Germany.
- Singh, Ajit, 2003. "Special and Differential Treatment, The Multilateral Trading System and Economic Development in the 21st Century," MPRA Paper 24301, University Library of Munich, Germany.
- Redding, Stephen, 1999. "Dynamic Comparative Advantage and the Welfare Effects of Trade," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 15-39, January.
- Redding, S., 1997. "Dynamic Comparative Advantage and the Welfare Effects of Trade," Economics Papers 140, Economics Group, Nuffield College, University of Oxford.
- Fagerberg, Jan, 1988. "International Competitiveness," Economic Journal, Royal Economic Society, vol. 98(391), pages 355-374, June.
- Jan Fagerberg, 1988. "International Competitiveness," Working Papers Archives 1988001, Centre for Technology, Innovation and Culture, University of Oslo.
- Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," CEPR Discussion Papers 4767, C.E.P.R. Discussion Papers.
- Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series rwp04-047, Harvard University, John F. Kennedy School of Government.
- Yilmaz AkyÃƒÂ¼z, 2005. "The WTO Negotiations on Industrial Tariffs : What is at Stake for Developing Countries?," Trade Working Papers 22080, East Asian Bureau of Economic Research.
- Shafaeddin, Mehdi, 2006. "Does trade openness helps or hinders industrialization?," MPRA Paper 4371, University Library of Munich, Germany.
- Yılmaz AKYÜZ, 2005. "The wto negotiations on industrial tariffs: What is at stake for developing countries?," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 20(232), pages 5-35.
- S.M. Shafaeddin, 2004. "Who Is The Master? Who Is The Servant? Market Or Government? An Alternative Approach: Towards A Coordination System," UNCTAD Discussion Papers 175, United Nations Conference on Trade and Development.
- Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
- Dasgupta, Partha & Stiglitz, Joseph E, 1988. "Learning-by-Doing, Market Structure and Industrial and Trade Policies," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 246-268, June.
- Dasgupta, Partha & Stiglitz, Joseph E, 1985. "Learning-by-doing, Market Structure and Industrial and Trade Policies," CEPR Discussion Papers 80, C.E.P.R. Discussion Papers.
- Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
- Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
- S.M. Shafaeddin, 2005. "Trade Liberalization And Economic Reform In Developing Countries: Structural Change Or De-Industrialization?," UNCTAD Discussion Papers 179, United Nations Conference on Trade and Development.
- World Bank, 2005. "Economic Growth in the 1990s : Learning from a Decade of Reform," World Bank Publications, The World Bank, number 7370, May.
- Buffie,Edward F., 2001. "Trade Policy in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521004268, October.
- Shigehisa Kasahara, 2004. "The Flying Geese Paradigm: A Critical Study Of Its Application To East Asian Regional Development," UNCTAD Discussion Papers 169, United Nations Conference on Trade and Development.
- Kasahara, Shigehisa, 2004. "The Flying Geese Paradigm: A critical study of its application to East Asian regional development," MPRA Paper 21881, University Library of Munich, Germany.
- Stiglitz, Joseph E, 1996. "Some Lessons from the East Asian Miracle," World Bank Research Observer, World Bank Group, vol. 11(2), pages 151-177, August.
- Ake Lundvall & Bengt, 2003. "Why the new economy is a learning economy," ECONOMIA E POLITICA INDUSTRIALE, FrancoAngeli Editore, vol. 2003(117).
- Bengt-Åke Lundvall, 2004. "Why the New Economy is a Learning Economy," DRUID Working Papers 04-01, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Marcus Noland & Howard Pack, 2003. "Industrial Policy in an Era of Globalization: Lessons from Asia," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 358, 03.
- Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
- Giovanni Amendola & Giovanni Dosi & Erasmo Papagni, 1993. "The dynamics of international competitiveness," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(3), pages 451-471, September.
- Maurizio Zanardi & Alberto Paloni, 2007. "The IMF, World Bank and policy reform," ULB Institutional Repository 2013/9823, ULB -- Universite Libre de Bruxelles.
- Buffie,Edward F., 2001. "Trade Policy in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521782234, October. Full references (including those not matched with items on IDEAS)