The Asian Industrial Policy Experience: Implications for Latin America

In the policy realm, the orthodox terms of engagement with globalization have been enshrined in the Washington consensus of secure property rights, fiscal discipline, sectorally neutral tax and expenditure policies, financial liberalization, unified and competitive exchange rates, openness to foreign trade and investment, privatization, and deregulation. Disappointing results in Latin America have contributed to a crisis of faith in Washington and the region, however. One response has been to augment the consensus with so-called second generation reforms such as strengthening prudential supervision of financial markets or competition policy. Another impulse has been to reconsider the more dirigiste policies that the consensus marginalized. In this regard, Japan, Korea, and Taiwan are promoted as the poster nations that have derived great benefits from increasing integration with the international economy, without surrendering national autonomy in the economic or cultural spheres, in effect, beating the West at its own game. If the selective intervention policies pursued by the Asians were found to promote growth, this would run directly counter to the emphasis on sectoral neutrality embodied in orthodox economic policy prescriptions. The fundamental questions addressed in this paper are: - What policies did the Asians pursue and what was their impact? - Could Latin American countries reproduce these policies and results, or are the economic fundamentals so different as to obviate the successful adoption of Asian-style industrial policies in Latin America? - If Latin American countries chose to pursue such policies, how might the international economic system impede their implementation? - Have there been unintended negative consequences to the adoption of Asian-style industrial policies that should be taken into consideration? The paper aims to communicate to the Latin American audience both factual evidence regarding the Asian experience, and the possible implications of this historical legacy for contemporary Latin American economic development strategies.

  • Authors: Marcus Noland & Howard Pack
  • Year: 2003
  • Organisation: LAEBA
  • Publisher: Inter-American Development Bank
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