The World Bank group building in Washington, DC. Photos: AFP/Getty Images
Picking winners: the return of industrial policy
By By Lanre Akinola | Published: 28 December, 2009
Conflicting interests
Such cooperation has been effectively used to raise developing nations’ perspectives on international trade relations within organisations such as the WTO. Dr Adrian Leftwich, a co-director at the Research Programme Consortium for Improving Institutions for Pro-Poor Growth, is sceptical about the extent to which organisations such as the World Bank are actually reacting to such trends.
“One needs to remember that like the state, the World Bank is not a single actor-institution. There are different interests and departments, and one suspects that from the outside there is new thinking going on, but one can say no more than that,” he says.
“It is not that straightforward, and I don’t think that messages are taken on board sufficiently,” adds Dirk Willem Te Velde, the head of the Investment and Growth Programme at the Overseas Development Institute, a UK-based think tank.
“It is a matter of building the evidence of what works where under what circumstances; and the crisis might help with that I think. Before the crisis, you had the Unctads and the Unidos of this world saying that industrial policy can be good in theory and the World Bank saying that in practice it never works,” he says.
“There are examples where specific policies have helped to get an economy further, or to respond to the crisis,” adds Mr Te Velde, pointing to countries such as Mauritius, where specific policies have helped to mitigate the effects of the global downturn.
“In Mauritius you had tourism receipts going down quite a lot, but ICT exports were still going up. They did that deliberately, it was a deliberate policy to promote the ICT sector. I think [international development agencies] can learn from these examples.”
He too argues that a more pragmatic and open debate is needed to effectively address the question of what sort of policy debate and policy formulation would be conducive to economic development in a post-credit crunch world. “If you [as a government] just say ‘let’s get out of the way’, that’s not sufficient for development… I think we can believe a bit more that the state can do the right things.”
None of this is to be mistaken for a blank cheque for government action, he hastens to add. “We shouldn’t go overboard of course, to say that governments can do what they want either. There needs to be some restraint on the things they do.”
This is echoed by Cambridge’s Mr Chang. “I am a great believer in the power of capitalism, but supporting capitalism doesn’t mean that you have to have it in the crudest, least regulated form.” Communicating this message to international policy circles is vital, he argues, and the opportunity to so may be shortlived.
“Lots of things are happening and coming together. Of course, these things are quite difficult to predict, and a lot will depend on how the world economy recovers from this. If it becomes a relatively quick recovery, that steam might go out of attempts to reform the system.”
The current crisis was a “wake up call,” he says. “But of course we can always hit the snooze button and go back to sleep. But that will only make things worse because you will wake up late and will only have bigger problems in your hands.”
