In this article, the term ‘industrial policy’ refers to the aggregate of all policies undertaken by the state to influence the development, catch-up, and innovation of specific industries. According to this definition, industrial policy is a selective policy that focuses on specific industries, rather than a universal or functional policy applied broadly to most industries. The origins of this definition can be traced at least as far back as the theory of the developmental state.1
In contrast to this definition, some argue that industrial policy encompasses universal or functional policies such as strengthening infrastructure, promoting human capital investment, maintaining fair competition, and creating an efficient market environment. This alternative definition has two drawbacks: First, it tends to blur the boundaries between industrial policy and other policies such as investment policy, export policy, human resources policy, and even macroeconomic regulation. Second, it is susceptible to being co-opted by (neo)liberal economics, using the guise of universal policies to oppose selective industry policy.
In a 2023 working paper published by the US National Bureau of Economic Research (NBER), several scholars, including the renowned economist Dani Rodrik, defined industrial policy as ‘those government policies that explicitly target the transformation of the structure of economic activity in pursuit of some public goal… a key characteristic is the exercise of choice and discretion by the public authorities, as in “We promote X but not Y”, though the latter part of this statement is typically left implicit’.2
In effect, what these scholars highlight is the role of selective industry policy in reshaping the division of labour within society. Similarly, in a speech delivered at the Brookings Institution in spring 2023, US National Security Advisor Jake Sullivan interpreted the Biden administration’s industrial and innovation strategy through the lens of selective industry policy: ‘A modern American industrial strategy identifies specific sectors that are foundational to economic growth, strategic from a national security perspective, and where private industry on its own isn’t poised to make the investments needed to secure our national ambitions’.3
The formulation and implementation of industrial policy are critical aspects of economic governance in China’s socialist market economy. Industrial policy is essential in achi
Post too long. Click here to view the full text.