The Political Economy of Industrial Policy in Asia and Latin America (original) (raw)

Failure and success: the fate of industrial policy in Latin America and South East Asia

Research Policy, 1999

The nature, timing and mix of interventionist policies are more important than the argument between having an industrial policy or letting the market rule. Several Asian countries have adopted an economic development policy of 'competitive protectionism', targeting nascent industries and assisting their technological advance so that they can export their products. Despite efforts to develop advanced technologies locally, some Latin American countries embraced 'autarchic protectionism', organizing production based upon older imported technologies behind national tariff walls primarily for domestic use. In this paper we compare Brazilian and Korean experience to analyze why interventionist technology policies failed in the former country even as they succeeded in the latter. A case study of a Brazilian university and its incubator facility mirrors developments in national technology policies. Latin American innovation policy is moving toward a 'triple helix' of cooperative relations among university, industry and government.

Industrial Policy in Asian Newly Industrialized Countries: Controversies, Review and Lessons

Acta Economica, 2023

ABSTRACT The paper’s aim is to use the successful example of the newly industrialized Asian countries, as well as the countries of the East Asian region in general, to prove the need to implement industrial policy in many countries, both those lagging behind in industrial development and those that have reached the technological frontier. The paper describes the evolution of industrial policy in these countries and what distinguishes them from other developing countries that were unsuccessful in its implementation: the developmental state, which recognized timely the turning point from the strategy of import substitution to the strategy of export promotion, implemented both strategies simultaneously, picked winners, provided support to infant industries through selective interventions, but also disciplined the recipients of its support, tracked its own comparative advantages and anticipated their changes, with a strong synergy between the state and private sectors, and looking at Japan as a model of industrial development, i.e. the lead goose. Industrial policy is one of the most controversial issues in economics. There has been a long debate between two schools of thought - orthodoxy and heterodoxy - as to whether there is a need for industrial policy in general, as well as the role of the state in the process of its creation and implementation, as opposed to the free market model of development in which there is no place for industrial policy, and if it appears it can be only of a general nature, and by no means in the form of selective interventions. Over the last 10 to 15 years, there has been a revision both at the academic level and in the real world that has made industrial policy more acceptable, and thus the debate about it has become less ideologically coloured and more pragmatic and nuanced. At the theoretical level, the market fundamentalist view of little theoretical justification for industrial policy has lost its dominance. Despite maintaining neoliberal orthodoxy as the advice of international financial institutions in the process of creating economic policy in developing countries, industrial policy remained/became important for the promotion of industrial development, especially the infant industries. It is accepted that there are many types of market failures that must be addressed through industrial policy. It is increasingly recognized that industrial policy is not just a highly idiosyncratic practice associated only with the miracle economies of East Asia, but what most of today's developed countries used when they themselves were in the position of the catching-up countries. As a conclusion/lesson, the paper discusses the possibility of transferring the East Asian model to other countries, and sheds light on the determinants of industrial policy success and failure. The key conclusion is that there is room for successful industrial policy even in countries that have reached the technological frontier and want to push it further, as well as in countries lagging behind in industrial development, although the global context in which industrial policy is situated has changed over time. A special commentary is referred to the economic, and industrial, development of former Yugoslavia countries.

Industrial Policy, Lobbying, and the Direction of Technological Change

SSRN Electronic Journal, 2000

This paper studies patterns of technological change under two scenarios. Under scenario I, a distorted government is open to the in ‡uence of producers'collective action, while under scenario II, a non-distorted benevolent government operates with optimal rules. The paper draws attention to the role that institutional arrangements and asymmetries in sectoral technology absorption play in shaping the path of technological change. Simulation results are threefold. First, biased institutions under scenario I might help drag the economy towards the right trajectory, with current generations experiencing welfare loss. Secondly, the benevolent government supports the path of capital-augmenting technological change, which is also supported by the distorted government only when institutions deliberately favor the investment goods producing sector. Thirdly, sectoral asymmetries in technology assimilation do not help industries overcome disadvantageous situations in the political market, and hence do not in ‡uence the direction of technological developments.