Industrial Policy, Innovation and Economic Stress: Opportunities and Risks

14 Pages Posted: 5 Oct 2014

See all articles by Frederick M. Abbott

Frederick M. Abbott

Florida State University - College of Law

Date Written: April 29, 2009


Global economic welfare is increasingly dependent upon rapid innovation to address critical problems of resource scarcity, climate change, security and public health. For the past decade, the preponderance of multilateral attention to innovation policy has focused on public health as threats from HIV/AIDS, malaria and other diseases threatened to overwhelm parts of the globe. More recently, attention has been shifting toward innovation policy to address the threats from climate change, as well as to address more general stresses on energy resources. Evidence of depletion of fisheries resources is demanding attention to marine research. Threats to global security are increasingly taking the form of technology-led incursions, while responses to security threats are increasingly high-tech. Each human era places its own unique demands on the “innovation community” and industrial policy. Yet it seems fair to suggest that since the end of the Second World War in 1945, the international community has not faced such a far-reaching combination of threats that demand technology-based solutions.

As if that were not enough, we are collectively in the midst of the most significant economic downturn since the Great Depression of the 1930s. This is not the time or place to review how this situation arose. For present purposes, it is important to note that the global financial crisis has placed enormous stresses on national governments to promote local economic stability and growth. And, a number of more economically and politically powerful national governments are choosing to promote economic growth through the adoption of stimulus plans that focus on innovation. The Chinese government, for example, has emphasized policies intended to promote scientific and technological advancement.

In many ways, Brazil and the United States share substantial opportunity in the current environment. Each is a large-economy country with resources to invest in innovation. Each is the home of industries capable of acting on a global economic stage. Though certainly there are areas of potential concern, neither is highly vulnerable to innovation as a form of protectionism or unfair trading practices. The greater concerns are for smaller economy and lesser developed countries that do not have the resources to “play in this game” and that may find themselves increasingly behind the technology curve. The adoption of “strong forms” of intellectual property will not create large pools of capital or substantial markets in these countries. As Brazil tackles the challenges of further refining its innovation policy, it will be interesting to see whether it evolves into a mercantile IP power, or forges an alternative course.

This era of global financial crisis presents risks and opportunities. The risk is that industrial policy and innovation will be used as new forms of trade protectionism. The opportunity is that massive government subsidization of technology programs will usher in a new era of security and prosperity. Policymakers must balance national and international interests carefully. For self-interested reasons, we cannot afford to leave half of the planet even further behind on the innovation curve.

Keywords: Innovation, Subsidies, Sustainable Development, Brazil, Intellectual Property

JEL Classification: H41, K32, K33, L52, O14, O31, O32, O34

Suggested Citation

Abbott, Frederick M., Industrial Policy, Innovation and Economic Stress: Opportunities and Risks (April 29, 2009). Available at SSRN: or

Frederick M. Abbott (Contact Author)

Florida State University - College of Law ( email )

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Tallahassee, FL 32306
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