Webinar: Reclaiming industrial policy for development – putting policymaking theory into practice
Channel: UNCTAD
Date: 2021-09-13

Virtually all of today’s advanced economies have completed their journey from widespread rural poverty to post-industrial wealth employing policies designed to shift the production structure towards higher productivity activities and sectors with progressively, better paid jobs and a greater upgrading potential. Such policies are conventionally called industrial policies.

From the late 1970s onwards, the debates between proponents and opponents of industrial policy became sharply ideological. In mainstream economic analysis, in the pronouncements of international development agencies, and in explicit policy statements by some (especially Anglo-Saxon) governments, industrial policy, along with its main architect, the state and its role in structural transformation fell in to disrepute, although it often continued in practice through more ad hoc responses to specific economic challenges. Growth theorists worked from standard production functions that assumed no special properties for any particular sector, or any particular role for any actor, such as the state, while others pointed to the potential for industrial policy to create ‘rent-seeking’ opportunities. In mainstream economies state has been deemed as a platform to seek economic rents. 

However, failures of most developing countries to industrialize under neoliberal policies and market governed economies has contrasted with the successes of many East Asian countries who pursued well planned policies to industrialize with strong developmental states. Hence, whether in the context of meeting the SDGs, tackling the climate emergency, rewiring supply chains in response to the Covid-19 crisis or leveraging new digital technologies, industrial policy has returned to centre stage of debates over the direction of development strategy at the national level. International organizations have become more open to discussing industrial policy in developing countries, in part thanks to China’s remarkable transformation over the last forty years, but also, as UNIDO has insisted, in the context of a climate emergency that requires a rapid shift from high- to low-carbon growth paths in both developed and developing countries.

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