![]() ![]() In developing countries especially, the costs of industrial policy need to be weighed up carefully. As we have highlighted in these pages recently, the trouble comes when governments seek to take shortcuts to industrialisation that push back against, rather than abet, shifts in markets and the development of comparative advantage among countries. Government planning and coordination, and the judicious use of support for industries with organic growth potential, can be a sound intervention that need not distort fair play between nations within the framework of rules-based trade. As India tries to turn Prime Minister Narendra Modi’s ‘Make in India’ campaign from slogan into policy, the appeal of import substitution industrialisation, as opposed to integration into global production chains, is growing. In Indonesia, President Joko Widodo and his key allies paint their ‘downstreaming’ policy, based upon bans of the export of ‘critical minerals’, as a model of industrialisation for other resource-rich countries. In middle income countries, there is burgeoning confidence about their role in the global economy and experiments in industrial policy have gained new prominence. In addition, a pronounced and widening inequality in developed countries has been blamed on de-industrialisation, and the solution offered has been new incentives to revive the manufacturing sector and create jobs. The political failure in countries like the United States and Australia of first-best, price-based policies to address carbon emissions has also encouraged the adoption of second-best industrial policies to boost the supply of, and demand for, technologies that will be crucial to reducing carbon emissions and achieving net zero goals. ![]() Most notable among them, the fragmenting geopolitical environment has led governments to be suspicious of openness to international trade. There are a number of reasons behind the turn to state intervention in developed economies. The past decade has seen a remarkable resurgence in the popularity of industrial policy in the developed world. Economics, Politics and Public Policy in East Asia and the Pacific
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