Dani Rodrik argues:
British Prime Minister Gordon Brown promotes it as a vehicle for creating high-skill jobs. French President Nicolas Sarkozy talks about using it to keep industrial jobs in France. The World Bank’s chief economist, Justin Lin, openly supports it to speed up structural change in developing nations. McKinsey is advising governments on how to do it right.
Industrial policy is back.
In fact, industrial policy never went out of fashion. Economists enamored of the neo-liberal Washington Consensus may have written it off, but successful economies have always relied on government policies that promote growth by accelerating structural transformation.
He then gives some specifics:
China is a case in point. Its phenomenal manufacturing prowess rests in large part on public assistance to new industries. State-owned enterprises have acted as incubators for technical skills and managerial talent. Local-content requirements have spawned productive supplier industries in automotive and electronics products. Generous export incentives have helped firms break into competitive global markets.
Chile, which is often portrayed as a free-market paradise, is another example. The government has played a crucial role in developing every significant new export that the country produces. Chilean grapes broke into world markets thanks to publicly financed R&D. Forest products were heavily subsidized by none other than General Augusto Pinochet. And the highly successful salmon industry is the creation of Fundación Chile, a quasi-public venture fund.
But when it comes to industrial policy, it is the United States that takes the cake. ...
... the US owes much of its innovative prowess to government support. As Harvard Business School professor Josh Lerner explains in his book Boulevard of Broken Dreams, US Department of Defense contracts played a crucial role in accelerating the early growth of Silicon Valley. The Internet, possibly the most significant innovation of our time, grew out of a Defense Department project initiated in 1969.
And he also says:
The shift toward embracing industrial policy is therefore a welcome acknowledgement of what sensible analysts of economic growth have always known: developing new industries often requires a nudge from government. The nudge can take the form of subsidies, loans, infrastructure, and other kinds of support. But scratch the surface of any new successful industry anywhere, and more likely than not you will find government assistance lurking beneath.
Here's my question: Is there any meaningful distinction between protectionism and industrial policy? He doesn't say it, but presumably Rodrik would also agree that tariffs, quotas and other traditional forms of protectionism can be used to "nudge" the development of new industries. Thus, tariffs, quotas, etc., are a form of industrial policy. He doesn't mention these measures, but all of the measures he does mention act similarly, in the sense that they provide a domestic industry with an advantage over (foreign) competitors, thereby helping them to develop. The "nudge" is to domestic industries, and is at the expense of foreign competitors.
So isn't "industrial policy," in effect, the same as protectionism? Isn't it just favoring domestic industries over foreign industries? It certainly seems like there is a high degree of overlap between the two, anyway, especially given the examples he provides.
