Industrial Policy Comes Out of the Cold

One of the best-kept economic secrets was strongly reconfirmed in 2010: most countries, intentionally or not, pursue industrial policy. And, as economies around the world struggle to maintain or restore growth in 2011, it is likely to be under a brighter spotlight than ever before.

WASHINGTON, DC – One of the best-kept economic secrets was strongly reconfirmed in 2010: most countries, intentionally or not, pursue an industrial policy in one form or other. This is true not only of China, Singapore, France, and Brazil – countries usually associated with such policies – but also for the United Kingdom, Germany, Chile, and the United States, whose industrial policies are often less explicit.

Given that industrial policy broadly refers to any government decision, regulation, or law that encourages ongoing activity or investment in an industry, this should come as no surprise. After all, economic development and sustained growth are the result of continual industrial and technological change, a process that requires collaboration between the public and private sectors.

Historical evidence shows that in countries that successfully transformed from an agrarian to a modern economy – including those in Western Europe, North America, and, more recently, in East Asia – governments coordinated key investments by private firms that helped to launch new industries, and often provided incentives to pioneering firms.

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