Is there a case for industrial policy? a critical suvey

What are the underlying rationales for industrial policy? Does empirical evidence support the use of industrial policy for correcting market failures that plague the process of industri-alization? This article addresses these questions through a critical survey of the analytical literature on industrial policy. It also reviews some recent industry successes and argues that public interventions have played only a limited role. Moreover, the recent ascendance and dominance of international production networks in the sectors in which developing countries once had considerable success implies a further limitation on the potential role of industrial policies as traditionally understood. Overall, there appears to be little empirical support for an activist government policy even though market failures exist that can, in principle, justify the use of industrial policy. Many countries in recent years have encountered great disappointment with the results of pursuing the conventional economic policies that John Williamson (1990) crystallized and named the Washington Consensus. Although few countries ever fol-lowed the pristine form of this consensus, some countries in East Asia adhered to many (but hardly all) of its components and experienced extraordinarily rapi