Trade and Industry

Current heterodox industrial policy thinking: A muting of aspirations or sound, pragmatic suggestions?

  • Year: 2017
  • Organisation: TIPS
  • Publication Author(s): Sandy Lowitt

The paper considers new heterodox theoretical contributions to the industrial policy debate in developing countries. Specifically it focuses on the challenge of “getting industrial policy right in circumstances where the country is run by flawed leaders presiding over a politically weak and internally fragmented state” (Change 2010). The paper covers new theoretical thinking on:1) institutions, their quality,  how they came to be and the direction of the causality between institutional improvement and economic growth and wealth creation; 2) business state relations and the need to ensure that IP instruments are compatible with existing political power balances; and 3)the capacity and capability of the bureaucracy and the role it plays in ensuring that the state can be embedded with business but not captured by its interests. The paper concludes with some case study examples of interesting IP initiatives, which demonstrate some of this new IP thinking. Examples include the implementation of second best institutions; a process approach to IP in which industry and government make joint discoveries of areas of global competitiveness; thinking about IP at a specific product level;  and  the islands of excellence work around solutions in cases in which a bureaucracy is constrained.

See Policy Brief: Three new practical ideas in heterodox industrial policy thinking