Essays On The Political Economy Of Industrial Policy

In the 1990s, development policy advocated by international financial institutions was influenced by the so-called Washington Consensus thinking. This strategy, based largely on liberalization, privatization, and price-flexibility, downplayed, if not disregarded, the role of government in steering the processes of technological learning and economic growth. With the exception of the Far East, many developing countries adopted the view that industrial policy resulted in inefficiency and poor economic growth. However, industrial policies have been successfully employed in the past in the countri ... More

In the 1990s, development policy advocated by international financial institutions was influenced by the so-called Washington Consensus thinking. This strategy, based largely on liberalization, privatization, and price-flexibility, downplayed, if not disregarded, the role of government in steering the processes of technological learning and economic growth. With the exception of the Far East, many developing countries adopted the view that industrial policy resulted in inefficiency and poor economic growth. However, industrial policies have been successfully employed in the past in the countries that are now developed industrial leaders, including the USA, Germany, and Japan, and more recently by in what are now some of the most vibrant emerging markets. India, China, Brazil, and many NIE Asian countries nurtured technology intensive industries to jumpstart their production and (later) exports. They have had remarkable success not only in boosting economic growth, but also in diffusing the benefits of technological learning to the rest of the economy. The book analyzes the impact of an ensemble of industrial policies, including those affecting the accumulation of technological knowledge, institutions supporting scientific and technological learning, the profitability of different lines of business, the protection of “infant industries”, competition and intellectual property rights, and trade policies. Ample historical evidence, which the book explores, shows that industrial policies do work when appropriate combinations of measures are adopted. Well beyond a “market failure” perspective — whereby “perfect” markets are the purest benchmarks — institutions and policies embed both learning and non-learning behaviors, the construction of domestic learning organizations, national systems of production, imitation, and innovation. Together, the book discusses the opportunities and constraints facing the implementation of industrial policies associated with the current regime of international economic relations (WTO, TRIPs).

Keywords: industrial policies, knowledge accumulation, science and technology policies, trade policies, infant industries, rent-seeking opportunities, patterns of specialization, intellectual property rights, competition, organizational capabilities

Bibliographic Information

Print publication date: 2009Print ISBN-13: 9780199235261
Published to Oxford Scholarship Online: February 2010DOI:10.1093/acprof:oso/9780199235261.001.0001

Abstract
In this paper, authors examine the political economy and consequences of industrial policy in the MENA region. How can the features of MENA’s industrial policy be explained? And what accounts for the fact that, against world trends, industrial policies in MENA countries didn’t followed the evolutionary path of industrial policies of other countries? Unlike in many other regions, industrial policy in MENA developed within the context of the region’s strong ‘social contract’ between the government and its people. Although industrial development was an objective, it at times took a backseat to the more important goals of social transformation and economic redistribution, which influenced not only the types and success of industrial policies adopted, but also critically influenced the balance of power among interest groups. Section two of the paper provides the theoretical framework for understanding the experience with industrial policy. Starting with a brief survey of the arguments used to justify industrial policy interventions, and drawing on various strands of the literature it provides a review of the various mechanisms and arguments which help understand the factors which determine the emergence and type of industrial policies observed and how they change. Using this framework section three reviews the experience of MENA countries during the 1950s to the 1970s and the emergence of state-dominated vertical industrial policy, where traditional/sector selective and sector specific policies have been used extensively. Section four attempts to explain the failure for industrial policy to change during the 1980s and 1990s. While the developing world has moved toward more market oriented policies and production systems that are dominated by the private sector and rely on market signals, MENA has maintained much of the old style industrial policies and high state intervention in the economy that characterized much of the developing world in the past. The final section five makes concluding remarks on the likely directions of industrial policy in the region. As internal and external forces shape the way industrial policies can be used in the globalized economy, the MENA region’s old style of industrial policy will need to adjust. The ultimate path of change will be determined greatly by each country’s initial conditions and individual political economy factors.

Citation

“Nabli, Mustapha K.; Keller, Jennifer; Nassif, Claudia; Silva-Jáuregui, Carlos. 2006. The Political Economy of Industrial Policy in the Middle East and North Africa. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/28426 License: CC BY 3.0 IGO.”

URI
http://hdl.handle.net/10986/28426

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