chapter  2
20 Pages

Industrial policy and economic development: Christine Oughton


Industrial policy may be defined as any set of measures designed to improve the economic performance of industry.Within this broad definition it is useful to distinguish competition and regulatory policy, where the main aim is to promote competition and efficiency via legal and regulatory measures and positive industrial policy, where the main aim is to target and improve economic performance via financial incentives and other policy measures.1 At a theoretical level this distinction between competition policy and positive industrial policy reflects a difference in emphasis between static and dynamic efficiency. Since the 1990s there has been a tendency, particularly amongst politicians to refer to positive industrial policy as competitiveness policy.The use of the term competitiveness to describe positive industrial policy has aroused considerable debate as much on the use of terminology, or what Krugman (1994, 1996) saw as the rhetoric of policy, as on the policy measures themselves. However, debate over industrial policy is nothing new. Throughout the post-war period there has been disagreement over the role and scope of positive industrial policy and this has been reflected in discernible policy shifts.