Industrial Policy Reconsidered

SANTIAGO – First, the World Bank became a tireless advocate of women’s and gay rights. Then the International Monetary Fund backed the use of capital controls and voiced concern over income inequality. Next in line for ideological modernization is the Inter-American Development Bank (IADB): in a forthcoming report, the bank calls for industrial policies in Latin America.

This is a welcome development. To be sure, the IADB – never as stodgy as the Bretton Woods twins, but still a traditional international financial bureaucracy – does not speak of industrial policies; it uses the politically correct phrase “productive development policies” (PDPs). Yet the message is clear: in Latin America, the state and public policy should have a role in deciding what gets produced. A generation ago, this message would have been heretical. Today, it is a matter of common sense.