ABSTRACT
Industrial policy has been a controversial topic among economists. Most academic economists liken it to a process of government intervention to “pick winners,” something that, to them, is highly unlikely to succeed, and if it does, it will reduce aggregate welfare. Recently, a renaissance of the concept of industrial policy seems to be underway. Surprisingly, recent publications by staff members of the IMF, an institution that up to now has been very skeptical of industrial policy, have argued in favor of an active role by the state in pushing the economy toward new sectors which would not have arisen only as a result of market forces (Cherif and Hasanov, 2019; and Cherif, Hasanov, and Zhu, 2016). The revival of industrial policies even in places where one would not have expected to find them may be due to the travails of many MICs over the last couple of decades, where the task of promoting development has shown itself not amenable only to good macroeconomic behavior or general policies such as maintaining a favorable investment climate. In addition, the enormous task of combatting climate warming would be completely impossible without a joint effort between the public and the private sectors and revived and renewed vision of industrial policy. The public sector must lead the way, with new regulations, carbon pricing schemes, explicitly attempting to steer resources toward alternatives to hydrocarbons, subsidies for good behavior, and steep taxes for bad. In some qualified cases, it could itself undertake investments through state-owned enterprises. However, a national development bank working closely with domestic and foreign private companies is likely to be a more successful way of tackling the issue.
