The purpose of this paper is to examine whether industrial policy has any
place in industrialization and economic development of developing countries in the
new world economy. We will argue that the answer to this question depends on the
development objective of the country and the role envisaged for international trade. If
the role of international trade is to achieve the objective of the integration of developing
countries into the world economy purely for the sake of integration, the industrial
policy is irrelevant. By contrast, if development is the ultimate objective of their
integration to the world economy what is irrelevant is the current dominate economic
philosophy and the international rules which govern trade and development. Such
rules facilitate globalization but they are not particularly conducive to industrialization
and development of developing countries.We have been witnessing two contradictory developments in the world
economy and international policy during recent decades. On the one hand, the need
for sophisticated trade and industrial policies has increased; on the other hand the
economic philosophy has changed against government intervention in the economy.
The need for industrial policy has increased because the international market has
become increasingly more concentrated; global production, international trade and
technology have become more and more dominated by TNCs; technological changes
have accelerated and production has become more knowledge-intensive. The policy
space of developing countries has, however, shrunk due to the dominant views of
the orthodoxy. Such views have been reflected on the conditionalities, imposed on
many developing countries by International Financial Institutions (IFIs) or bilateral
donors and to a large extent on GATT/WTO rules. More recently, they have been
propagated through “Washington Consensus”. Meanwhile the across-the-board and We have been witnessing two contradictory developments in the world
economy and international policy during recent decades. On the one hand, the need
for sophisticated trade and industrial policies has increased; on the other hand the
economic philosophy has changed against government intervention in the economy.
The need for industrial policy has increased because the international market has
become increasingly more concentrated; global production, international trade and
technology have become more and more dominated by TNCs; technological changes
have accelerated and production has become more knowledge-intensive. The policy
space of developing countries has, however, shrunk due to the dominant views of
the orthodoxy. Such views have been reflected on the conditionalities, imposed on
many developing countries by International Financial Institutions (IFIs) or bilateral
donors and to a large extent on GATT/WTO rules. More recently, they have been
propagated through “Washington Consensus”. Meanwhile the across-the-board andWe have been witnessing two contradictory developments in the world
economy and international policy during recent decades. On the one hand, the need
for sophisticated trade and industrial policies has increased; on the other hand the
economic philosophy has changed against government intervention in the economy.
The need for industrial policy has increased because the international market has
become increasingly more concentrated; global production, international trade and
technology have become more and more dominated by TNCs; technological changes
have accelerated and production has become more knowledge-intensive. The policy
space of developing countries has, however, shrunk due to the dominant views of
the orthodoxy. Such views have been reflected on the conditionalities, imposed on
many developing countries by International Financial Institutions (IFIs) or bilateral
donors and to a large extent on GATT/WTO rules. More recently, they have been
propagated through “Washington Consensus”. Meanwhile the across-the-board and universal trade liberalization implemented by developing countries during recent
decades has failed after the failure of across-the-board import-substitution of the
preceding decades. Such failures have put trade policy as well as trade diplomacy at the cross-roads.