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From semiconductors to electric vehicles, governments are identifying the strategic industries of the future and intervening to support them – abandoning decades of neoliberal orthodoxy in the process. Are industrial policies the key to tackling twenty-first-century economic challenges or a recipe for market distortions and lower efficiency?
Card-carrying neo-liberals like me, who pushed for opening capital flows wide in the early 1990's, had a particular vision in mind. But the future that we hoped for did not come to pass.
We looked at how extraordinarily strongly the world's system of relative prices was tilted against the poor: how cheap were the products they exported, and how expensive were the capital goods that they needed to import in order to industrialize and develop.
"Why not free up capital flows and so encourage large-scale lending from the rich to the poor?" we asked. Such large-scale lending might cut a generation off the time it would take economies where people were poor to converge with the industrial structures and living standards of rich countries.
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