REINVENTING INDUSTRIAL STRATEGY: THE ROLE OF GOVERNMENT POLICY IN BUILDING INDUSTRIAL COMPETITIVENESS

Abstract

The paper reviews the nature of current globalization and the growing divergence in competitive\nperformance in the developing world. It considers the case for industrial policy, contrasting the\nneoliberal with the structuralist approach. It argues that there is a valid case for selective interventions in\novercoming the market and institutional failures in building the capabilities required for industrial\ndevelopment. It describes the strategies adopted by the Asian Tigers to build industrial competitiveness,\nand concludes with lessons for other developing countries. The kinds of industrial policy needed in the\ncurrent setting are different from traditional industrialisation strategies, but globalization and technical\nchange do not eliminate the need for intervention. On the contrary, given path dependence,\ncumulativeness and agglomeration economies, they increase it. There is a need to reconsider the rules of\nthe game constraining the exercise of industrial policy, and for international assistance in designing and\nimplementing appropriate policies.