An industrial policy is any government regulation or law that encourages the ongoing operation of, or investment in, a
particular industry. It is often related to, or wholly determinant of, investment
policy for that industry.
An active intervention in industrial development is the policy of most if not all countries in the world. Even the
United States, which prides itself as a "free-trading" nation, has implemented strong
tax, tariff, and trade laws to protect itself from "dumping", the flooding of a market by a competing nation with goods or services below market
prices in order to gain an advantage over domestic firms.
In Japan, the powerful MITI has often taken an active
hand in development of major industries, particularly electronics and software. The impact of this intervention is disputed, as Japan is still not a power in software, and
has lost much of its advanced electronics industry to Asian Tigers, especially
South Korea and Taiwan. However, authors such as Robert
Hunter Wade in 'Governing the Market', provide arguments to support the link between government intervention and the successful
industrial development of this whole region. Benefits from foreign investment such as the transfer of technology, skills and
managerial techniques that could help infant industries become internationally competitive were captured using policies such as
local content rules and joint-venture regulations. As such, the development of infant industries does not simply involve
protectionism as the infant industry argument suggests, but is dependent on a
country's ability to learn directly from foreign direct investment. Such
policies have traditionally been central to the industrial policies of countries that are attempting to catch up with
technologically and economically more advanced states. A good example is the US and European attempt to catch up with Great
Britain during the 18th and 19th century (see Ha-Joon Chang's 'Kicking Away the Ladder').
Many of these domestic policy choices are now prohibited by the WTO Agreement on Trade Related Investment Measures.
Despite the claim that policy was aimed at developing world-class competitors, this is difficult to reconcile with the minimal
impact that an active industrial policy has had on immigration policy. Presumably,
the nation that seeks to become the global leader in a particular industry must attract many of the most qualified talents in
that field, to apply and to improve their own particular individual capital to that
problem in that country. Historically, this didn't happen, and the relationship between the immigration and industry-protection
rules was at best ambiguous. This suggests strongly that the real purpose of industrial policy was always and only
protectionism, the protection of existing jobs for political gain.
Today most industrial policy is subordinated to tax, tariff and trade rules of
the General Agreement on Tariffs and Trade (GATT) and various
trade pacts promising various degrees of "free trade", which in practice means limited
subsidy and no protectionism of any one industry.
However, notable exceptions including agricultural subsidies in both Europe and
the US, and cultural subsidies in Canada, prove that the principle of industrial policy
is alive and well, and merely retreating into the shadows.
See also
External links
This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
