ABSTRACT
This chapter assesses the currently popular view that industrial policy was behind the ‘downfall’ of the East Asian model. It considers whether recent economic, political, and institutional changes (both at national and international levels) have made the use of industrial policy in East Asia less feasible in the future. The first under-explored justification for industrial policy is the need to co-ordinate investments, not simply complementary investment projects but also competing projects, to ‘manage competition’. This was actually the central point of contention in the industrial policy debate of the early 1980s over the Japanese experience, but was curiously ignored by The East Asian Miracle (EAM). The EAM certainly recognised the importance of scale economies in modern industrial development, when it discussed co-ordination of complementary investments. The EAM argued that successful management of industrial policy, as one of those ‘selective’ or ‘strategic intervention’ policies that go beyond the ‘functional intervention’ to address ‘market failures’, requires certain unusual institutional capabilities.
