The Return of Industrial Policy

102 Pages Posted: 18 Sep 2011 Last revised: 10 Feb 2016

See all articles by Dan Ciuriak

Dan Ciuriak

Ciuriak Consulting Inc.; Centre for International Governance Innovation (CIGI); C.D. Howe Institute; Asia Pacific Foundation of Canada; BKP Development Research & Consulting GmbH

Date Written: May 7, 2013

Abstract

Industrial policy is experiencing a renaissance, at least in terms of public profile: around the world, many governments are actively — and overtly — intervening to influence the structural evolution of their economies, or thinking about it. The European Commission has proposed a “fresh approach to industrial policy”; the Obama Administration has committed to taking “strategic decisions about strategic industries” and the director of the White House’s national economic council has cogently articulated the case for a manufacturing policy; and Japan has indicated it wants to create a new “Japan Inc.” The Economist has worried about it (“Picking winners, saving losers: Industrial policy is back in fashion. Have governments learned from past failures?”); the OECD has studied it (Fostering New Sources of Growth – Is there a Role for “Industrial” Policy in the 21st Century?); UNCTAD has been “rethinking” it; the World Bank has re-introduced it into its development toolkit, albeit with qualifications (only if first best policies fail and then only temporarily and as neutrally as possible); and even the IMF has debated it. Governments of course have never stopped tinkering with industrial structures — for reasons as varied as the myriad collisions between elegant economic theories and messy economic realities. What is novel — and controversial — today is that industrial policy has come in from the cold. This paper reviews the empirical and theoretical developments that have returned industrial policy to the policy mix. This paper reviews the empirical and theoretical developments that have returned industrial policy to the policy mix, including a review of practice in the United States, Canada, the European Union and Japan as well as in the major emerging markets, Brazil, China and India. It concludes that a new economic consensus is required to make this presence comfortable for a generation of policymakers and analysts whose careers were made in a context where it was simply understood that governments cannot “pick winners” and suggests the basic precepts on which a new consensus might be built.

Keywords: industrial policy, manufacturing, innovation system, economic development

JEL Classification: L52, O25

Suggested Citation

Ciuriak, Dan, The Return of Industrial Policy (May 7, 2013). Available at SSRN: https://ssrn.com/abstract=1929564 or http://dx.doi.org/10.2139/ssrn.1929564

Dan Ciuriak (Contact Author)

Ciuriak Consulting Inc. ( email )

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Centre for International Governance Innovation (CIGI) ( email )

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C.D. Howe Institute ( email )

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Asia Pacific Foundation of Canada ( email )

Canada

HOME PAGE: http://ciuriakconsulting.com/

BKP Development Research & Consulting GmbH ( email )

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