Industrial Policy in the 21st Century

Abstract

Industrial policy is back at the centre stage of policy debate, while the world is undergoing dramatic transformations. This article contributes to the debate by developing a new theory of industrial policy, incorporating some issues that have been neglected so far and taking into account the recent changes in economic reality. The authors explore how the incorporation of some of the neglected issues — commitments under uncertainty, learning in production, macroeconomic management (especially demand management), and conflict management — changes the theory. They then examine how the theory of industrial policy should be modified in light of recent changes in economic reality: the rise of the global value chain, financialization and new imperialism. This contribution aims at promoting a pragmatic approach to industrial policy and pointing to new areas for policy intervention in a changing world.

Unlocking the potentials of Micro and Small Enterprises (MSEs) in building local technological capabilities in agro-processing industry

“…This justifies the need to focus on building local production system and technological capability. The relationship between local production system and innovation/technological capability can be seen in terms of the early notion of communalities between production and knowledge systems (Bell and Albu 1999) and the recent development that links learning in production with innovation process (Chang and Andreoni 2020). With respect to the first, Bell and Albu (1999) defined production system as constituting product designs, materials, machines, labour inputs and transaction linkages involved in the production of goods.…”

“…The third technology-pull mechanism relates to changes in the existing production processes and structures that may trigger changes in complementary products and processes and technologies within and across firms. With respect to market-pull mechanisms, learning in production is motivated by changes in the quantity and quality (or composition).of demand (Chang and Andreoni 2020).…”

“…Technological linkages among different manufacturing processes involve diverse techniques, productive knowledge and production technologies defining what Andreoni (2018) calls 'capability domains' depicting similarities and complementarities across processes. Specific to the agro-food sector, Chang and Andreoni (2020) noted that contemporary capability building practices go beyond the traditional food processing capabilities. It requires developing other complementary sets of capabilities in mechanics and control systems for packaging, on ICT capabilities for food tracking and, on the capabilities in advanced materials for smart packaging.…”

COVID-19 and the state in Africa: The state is dead, long live the state

“…Just like Asian countries the state in Africa can be made to play a leading role in industrialization for example. The state is best placed, as recent research shows, to handle thorny questions that industrialization requires such as affordable financing through the setting up of development banks (Mazzucato & Penna, 2018), technological upgrading (Lin, 2010) and learning in production (Chang & Andreoni, 2020). In other words an intelligent blending of the state and market can be wrought in response to some of Africa's seeming intractable policy challenges.…”

Natural resources, institutions, and economic transformation in Mozambique

“…Since the turn of the 21st century, especially over the past decade, it has been widely argued that 'industrial policy is back', with new approaches, theories, and practices on the topic emerging (Aiginger and Rodrik 2020; Chang and Andreoni 2020; Dietsche 2018b; Stiglitz 2017). Most economists agree, however, that the reliance on 'perfect markets' has not brought about satisfactory economic and social outcomes in most of the developing world (Chang and Andreoni 2020;Rodrik 2004;Stiglitz 2017). With regard to Sub-Saharan African economies (including Mozambique), for instance, it has been documented that, despite the high growth rates of the past two decades, these economies 'have experienced unsatisfactory productive transformation' and low job creation in manufacturing and services (Aiginger and Rodrik 2020: 1).…”