Martin’s Press.

In two recent studies, the World Bank (1993, 1994) spelled out its understanding of the role of industrial policy in economic development. The Bank acknowledges a positive role of functional, or market-friendly, interventions in Asia, but sees no evidence of a positive contribution by selective governmental intervention. In his new book, Sanjaya Lall of Oxford University gives a critical assessment of the method of analysis as well as the theoretical foundations of these studies. His response is a formidable challenge not only for the World Bank, but for many development and transition economists in the neoclassical tradition. Most of the successfully growing East-Asian economies have pursued sector-specific industrial policy at some stage. In this, the World Bank (1993) and its critics 1 agree. However, the Bank considers free markets as the core to success, while specific policy has at best a supplementary role, and it interpretspolicy impact pessimistically in that it argues that 1. “despite these actions we find very little evidence that industrial policies have affected either the sectoral structure of industries or rates of productivity change ” (1993, p. 21), and 2. the industrial policy followed by the East Asian economies would not be transferable to other regions because of the political and economic conditions in this region