Week 7.2 - Industrialisation and Trade Flashcards
1
Q
What is selective industrial policy?
A
It deliberately favors specific industries or firms against market signals to enhance efficiency, promote productivity growth, and manage industrial decline
2
Q
What are the key tools of industrial policy?
A
Tariff protection, subsidies, public investment, government support, public-private partnerships, and even coercive measures
3
Q
Why did industrial policy become marginalized?
A
The rise of neoliberalism reduced state intervention in favor of free-market policies
4
Q
Why has industrial policy re-emerged?
A
Shifts in trade norms and the 2008 Financial Crisis renewed interest in active industrial policy
5
Q
Why is manufacturing essential for economic development?
A
No country has achieved high-income status without industrialization and structural transformation
6
Q
What drives industrial dynamics and innovation?
A
“Learning in production” fosters technological advancements and efficiency improvements
7
Q
How should industrial policy evolve beyond traditional manufacturing?
A
It should include broader sectors and account for technological and economic shifts
8
Q
What defines manufacturing?
A
The use of mechanization and chemical processes to produce goods
9
Q
Why does agriculture have limited productivity growth?
A
It is constrained by natural factors like soil, climate, and seasonal variations
10
Q
How does service sector productivity growth differ from manufacturing?
A
Service productivity often increases by shifting costs to consumers, e.g., self-checkouts
11
Q
Why is manufacturing a strong driver of productivity growth?
A
It enables faster productivity improvements compared to agriculture and services
12
Q
How does manufacturing contribute to other sectors?
A
It diffuses technologies, improves efficiency, and introduces organizational innovations
13
Q
Why can relying on primary commodities be problematic?
A
They suffer from declining terms of trade, making industrial diversification crucial
14
Q
What is manufacturing’s role in the formal economy?
A
It provides stable jobs, higher wages, and structured economic development
15
Q
How does agriculture complement industrialization?
A
Through technological applications, skills transfer, and infrastructure development
16
Q
What role does agriculture play in financing industrialization?
A
Agricultural exports provide capital for industrial investments
17
Q
How does rural labor contribute to industrial growth?
A
Educated workers from rural areas transition to manufacturing jobs
18
Q
Which country successfully integrated agriculture with industrialization?
A
Malaysia is a notable example of balancing agricultural and industrial growth
19
Q
What do critics of industrial policy argue?
A
State intervention distorts markets, misallocates capital, and fosters rent-seeking
20
Q
What is the “anti-interventionist” argument regarding Japan and South Korea?
A
Some argue they would have grown even faster with less state intervention
21
Q
What do proponents of industrial policy argue?
A
Industrialization is not spontaneous; state intervention has historically played a key role
22
Q
What is meant by “embedded autonomy” in industrial policy?
A
A balance where the state supports industries while avoiding excessive interference
23
Q
How does industrial policy address market failures?
A
It corrects inefficiencies in capital allocation and promotes strategic sectors
24
Q
What is the role of FDI in industrial policy?
A
FDI should be aligned with industrial policy objectives, not replace them
25
What examples support industrial policy’s effectiveness?
The US IT sector, European Airbus, Nokia, and Japan’s auto industry
26
Why is technology acquisition crucial in industrial policy?
Mastery and innovation take time and require strategic state support
27
What are productive capabilities?
They determine what an economy can produce based on its factors of production
28
How can productive capabilities be improved?
By developing infrastructure, skills, and technology to better utilize endowments
29
How do productive capabilities relate to the infant industry argument?
Industries need time to grow, reach economies of scale, and improve productivity through experience
30
What role does government play in supporting infant industries?
Governments create space for industries to "grow up" by providing protection, investment incentives, and policy support
31
What is a key challenge to implementing industrial policy today?
Many argue that there is little policy space due to global trade rules, but some leeway still exists
32
Can tariffs still be used for industrial policy?
Yes, as long as they are within WTO-bound limits
33
How do WTO rules affect industrial policy?
They restrict direct protectionist measures but leave room for indirect strategies
34
How can industrial policy promote infrastructure and skills?
Through targeted investments in key industries and education
35
What role can government banks or sovereign wealth funds play?
They can provide loans or equity investments to encourage strategic mergers
36
How can tax incentives support industrial development?
Corporate tax exemptions, accelerated depreciation, and investment allowances can encourage strategic investments
37
How can government-funded R&D support industrial policy?
It can help transfer technology to priority sectors at a lower cost
38
How can industry-university collaborations aid industrial policy?
Governments can direct research funding towards industries with strategic potential
39
Why exempt SMEs from anti-trust laws?
To enable collaboration in R&D and export market development
40
How can government procurement support industrial policy?
By prioritizing domestic firms and strategic sectors in public contracts
41
What role can state-owned enterprises (SOEs) play?
They can enter sectors where the private sector is unwilling to invest
42
Why is worker training important in industrial policy?
It overcomes firms’ reluctance to invest in workforce skills
43
How can export taxes be used strategically?
To encourage domestic processing of raw materials rather than exporting them unprocessed
44
Can countries still raise tariffs under WTO rules?
Yes, but only up to their bound tariff limits
45
What is NAMA, and why does it matter for industrial policy?
Non-Agriculture Market Access (NAMA) negotiations could restrict tariff flexibility, but they have stalled
46
Can countries renegotiate bound tariffs?
Yes, but it is costly and requires compensation to other WTO members
47
What does GATT Article XVIII allow for developing economies?
It provides some flexibility for industrial policy under economic development provisions
48
What role do Balance of Payments (BOP) provisions play in industrial policy?
Countries can impose quantitative restrictions on imports under BOP grounds
49
Are all subsidies prohibited under WTO rules?
No, non-export subsidies for R&D, regional development, and environmental goals are permitted
50
Can Least Developed Countries (LDCs) use export subsidies?
Yes, LDCs and some developing countries have more flexibility in using them
51
What protections exist for FDI under WTO rules?
The Trade-Related Investment Measures (TRIMS) agreement protects foreign investors but allows joint venture requirements and technology transfer mandates
52
Can governments still invest in local production?
Yes, as long as it does not involve direct export subsidies
53
Why look beyond the WTO when assessing policy space?
Bilateral and regional trade agreements increasingly shape global trade restrictions
54
How do BTAs and RTAs affect industrial policy?
They often impose stricter rules than the WTO, further limiting policy options
55
What does Shadlen argue about policy space under the WTO?
He acknowledges some remaining space but warns that BTAs and RTAs reduce it further
56
How have right-wing populists influenced global trade agreements?
Leaders like Trump have promoted even more asymmetrical trade relations than the neoliberal WTO
57
How can the state reduce economic uncertainty?
By ensuring demand through protectionist measures, limiting competition, and prioritizing domestic firms in government contracts
58
How can the state encourage innovation?
By leading in technological development, supporting research consortia, and subsidizing R&D
59
What role does the state play in setting technological standards?
It can impose regulations that push industries toward technological evolution
60
Why should the state provide technological public goods?
To ensure widespread access to innovation and maintain global competitiveness
61
Why is there a call for a pragmatic approach to industrial policy?
Industrial policy needs to be flexible and adaptive to changing economic conditions
62
Why should industrial policy target inequality and job precarity?
Because economic growth alone does not guarantee equitable job creation
63
What global challenges necessitate new approaches to industrial policy?
Climate change, automation, and shifting global trade patterns
64
How does industrial policy need to adapt to changing power dynamics and the climate crisis?
By integrating environmental sustainability and resilience into economic strategies
65
Why should industrial policy link economic upgrading to social outcomes?
To ensure that economic growth translates into improved social conditions and well-being
66
What are horizontal industrial policies?
Policies that apply to all firms, such as R&D tax credits
67
What are vertical industrial policies?
Policies that favor specific sectors or firms, such as targeted renewable energy subsidies
68
How do supply-side policies work in industrial policy?
They lower production or R&D costs through grants, subsidies, and tax credits
69
What are demand-side policies in industrial policy?
Policies that increase market size, such as tax credits for purchasing electric vehicles
70
Why should industrial policy focus on ‘good-jobs externalities’?
Because economic policies should not just increase output but also improve job quality
71
What was the traditional focus of industrial policy?
Manufacturing, export competitiveness, and top-down policy instruments
72
How should industrial policy evolve to support good jobs?
By broadening into services, supporting SMEs, and adopting a collaborative approach
73
Why does Rodrik say, “Good jobs require good firms”?
Because improving job quality depends on strengthening firms’ capabilities and growth
74
What was Ethiopia’s GDP growth between 2003-2014?
An average of 11% per year
75
What was the impact of Ethiopia’s Growth and Transformation Plan (2011-2014)?
Manufacturing grew at an average of 20% annually
76
How did Ethiopia’s life expectancy change between 1992 and 2013?
It increased from 48 to 63 years
77
How was Ethiopia’s cement industry successful?
Through import substitution and strong state-private sector cooperation
78
Why was Ethiopia’s floriculture sector a success?
It became a major export-oriented agro-manufacturing industry with both foreign and domestic investment
79
Why did Ethiopia’s leather industry struggle despite its endowments?
Growth was sluggish due to industry challenges, but it is improving
80
What is a global value chain (GVC)?
The full range of activities needed to bring a product from conception to final disposal
81
How has globalization affected production processes?
It has led to fragmented production across multiple countries, creating international supply chains
82
Who developed the GVC framework, and why?
An interdisciplinary and international research group to track industry globalization and its impacts
83
What does GVC analysis provide?
Conceptual and methodological tools to study global trade, production, and development
84
What are the two main approaches to GVC analysis?
Top-down is focus on lead firms and inter-firm networks.
Bottom-up is focus on countries and regions’ economic and social upgrading or downgrading
85
What happens when different stages of production take place in different countries?
The supply chain becomes global, forming a Global Value Chain (GVC)
86
How can countries participate in GVCs?
Through backward participation (buying inputs from GVC firms) or forward participation (selling inputs to GVC firms)
87
How has outsourcing affected sectoral boundaries?
It has blurred them, making traditional industry classifications less relevant
88
What new challenges arise in global production networks?
"Friend-shoring" (favoring politically aligned partners) and industry-specific trade alliances
89
What are the four types of economic upgrading?
Process upgrading (improving production methods)
Product upgrading (higher-value goods)
Functional upgrading (moving to higher-value tasks)
Chain upgrading (shifting to more profitable sectors)
90
What does social upgrading involve, according to the ILO?
Better work access, improved working conditions, stronger labor rights, and social protection
91
What does Kaplinsky argue about economic rents in GVCs?
Developed countries capture most rents, maintaining control over innovation
92
What is meant by "governance of the chain" in GVCs?
Developed countries organize labor division and influence upgrading capacity
93
Why is systemic efficiency important in GVCs?
To enhance competitiveness across the value chain
94
What does Kaplinsky conclude about competition in GVCs?
Where barriers to entry are low, competition increases, leading to worse outcomes
95
How do intellectual property and branding create economic rents?
Ownership of patents, design rights, and branding generates high profits (e.g. furniture design vs manufacturing)
96
What key questions should be asked in GVC analysis?
Where are rents generated?
Where is value added?
How can countries move up the chain?
97
How do GVCs expose countries to new economic benefits?
Through increased trade, foreign direct investment (FDI), and technology spillovers
98
How does GVC participation improve national productivity?
By giving firms access to larger markets, pushing them to upgrade capabilities
99
How does GVC participation impact a country's reputation?
It enhances credibility, making it easier to establish new business relationships
100
What impact do GVCs have on female employment?
They create new job opportunities, reducing women's economic dependency
101
Why does GVC participation create an urgency to upgrade skills?
To remain competitive as global supply chains evolve
102
How can GVCs trap developing countries?
By keeping them stuck in low-value-added activities
103
Why are developing economies vulnerable in GVCs?
Demand and supply fluctuations can severely impact their industries
104
Why does GVC mobility create risks?
Firms can easily relocate if production, transport, or communication costs change
105
How does GVC participation create fiscal risks for governments?
It can lead to investment declines and revenue losses when firms relocate
106
What is the "race to the bottom" in GVCs?
Countries may lower labor and environmental standards to attract foreign investment
107
How does GVC participation increase informal work?
It leads to outsourcing and precarious employment, making it harder to enforce labor rights
108
Why is skill upgrading urgent for developing economies in GVCs?
To avoid stagnation in low-skilled, low-wage sectors
109
How can governments support companies and trade unions in GVCs?
By helping them recognize opportunities and risks in global supply chains
110
How can governments assist local producers in entering GVCs?
By providing financial support, infrastructure, and training programs
111
How can industrial policy help firms move up the value chain?
By improving design capabilities, negotiating trade deals, and enhancing infrastructure
112
What kinds of investments can governments make to support GVC participation?
Transport, energy, ICT, worker training, and financial intermediation
113
What key tension exists in industrial policy today?
Balancing local economic needs with global trade rules
114
Why must developing countries negotiate policy flexibility?
To retain space for industrial policy within multilateral and regional agreements
115
How can industrial policy be adapted to fragmented global trade systems?
By developing strategies that work around restrictions while maximizing national benefits
116
Why must industrial policy target good jobs and worker-friendly technologies?
To ensure that economic growth leads to equitable employment and sustainable development
117
Why should policymakers look beyond traditional "developmental states"?
Other models, such as Sweden and Finland, offer innovative industrial strategies
118
How should industrial policy align with environmental sustainability?
By incorporating green technologies and low-carbon industries
119
Why does agricultural development require industrial policy?
Because modernizing agriculture relies on industrial inputs like machinery, fertilizers, and logistics
120
Why does industrial policy involve risk-taking?
Successful policies require experimentation, and some initiatives may fail before succeeding
121
What will remain a challenge for industrial policy in the future?
The persistence of mismanaged states and governance failures
122
Does economic upgrading always lead to social upgrading?
No, firms can improve productivity and profitability without improving worker conditions
123
What are common problems faced by workers in global value chains?
Insecure employment, poor working conditions, and lack of worker protections
124
What role do lead firms play in Global Production Networks (GPNs)?
They dominate production chains and set conditions for suppliers
125
What countries have seen major production expansion in GPNs?
China, India, and Brazil have experienced significant growth
126
What are the opportunities from GPN participation?
Economic upgrading, access to larger markets, and technology transfer
127
What are the challenges of working in GPNs?
High commercial pressures, strict quality standards, and buyer-driven demands
128
How has employment changed due to GPNs?
Increased jobs in manufacturing, agriculture, and services, but with growing insecurity
129
How have GPNs impacted women and migrant workers?
They have gained more wage employment but often in low-paid and insecure jobs
130
What is economic upgrading?
Moving to higher-value activities that enhance technology, skills, and profitability
131
What is process upgrading?
Improving production efficiency, often reducing the need for unskilled labor
132
What is product upgrading?
Producing higher-quality or more advanced goods, requiring skilled workers
133
What is functional upgrading?
Expanding into higher-value activities like branding, logistics, and R&D
134
What is chain upgrading?
Shifting to more advanced industries or markets
135
What is social upgrading?
Improving workers' rights, job quality, and working conditions
136
What measurable standards define social upgrading?
Wages, working hours, employment type, and social protections
137
What enabling rights support social upgrading?
Freedom of association, collective bargaining, anti-discrimination, and worker voice
138
Why doesn’t economic upgrading always lead to social upgrading?
Firms can increase profits while maintaining poor working conditions
139
What example highlights this disconnect?
Foxconn in China achieved economic success but faced severe worker exploitation
140
What determines a firm's access to upgrading opportunities?
Its position within the value chain
141
How does worker status impact social upgrading?
Regular workers (permanent jobs) have better wages and protections than irregular workers (casual contracts, low pay)
142
How do labor contractors affect social upgrading?
They provide jobs but often exploit workers through insecure contracts
143
What are the characteristics of small-scale home-based work?
High vulnerability, lack of contracts, and low-value capture
144
What are the challenges in low-skilled, labor-intensive jobs?
High job numbers but low wages, job insecurity, and poor conditions
145
What is medium-skilled, mixed-technology work like?
More stable jobs but under pressure from global buyers
146
What defines high-skilled, technology-intensive work?
Fewer jobs but higher pay and job security
147
What are the advantages of knowledge-intensive jobs?
High wages, stability, and career opportunities but require advanced education
148
How can economic upgrading lead to social downgrading?
By increasing job insecurity and labor exploitation despite business growth
149
What are different firm strategies in economic upgrading?
High-road (invest in skills, wages, and security)
Low-road (cut costs, exploit cheap labor), and mixed (combine skilled and casual workers)
150
What did the Moroccan garment industry case study show?
Skilled workers benefited from economic upgrading, but irregular workers were excluded
151
What is small-scale worker upgrading?
Home-based workers improve conditions through fair trade and producer organizations
152
How does labor-intensive upgrading occur?
Workers transition from farming to factory jobs with better standards
153
What is higher-skill upgrading?
Workers move into technology- and knowledge-based industries
154
Why do some workers struggle to transition into better jobs?
Women, migrants, and casual workers often face barriers to skill upgrading
155
Why must social upgrading be actively promoted?
Market forces alone do not ensure better working conditions
156
What interventions can support social upgrading?
Trade unions, worker representation, and company-led ethical initiatives
157
What role do governments play in social upgrading?
Enforcing labor laws and workplace protections
158
How can international agreements promote better labor standards?
Through ILO and OECD guidelines that set global expectations for worker rights
159
How do regional-bilateral agreements affect industrial policy?
They impose stricter constraints, making it harder for developing countries to alter comparative advantages
160
Do developing countries have more flexibility under WTO or regional-bilateral agreements?
WTO allows some industrial policy flexibility, but regional-bilateral agreements severely restrict it
161
What are the benefits of multilateral integration under WTO?
Market access, rules-based trade, and selective industrial policy tools
162
What industrial policy tools remain under WTO?
Limited tariff adjustments, R&D subsidies, human capital investment, and some investment regulations
163
How does WTO impact patent policies?
It allows limited flexibility, such as compulsory licenses under certain conditions
164
How do regional-bilateral agreements compare to WTO?
They offer better market access but impose stricter industrial policy constraints
165
What restrictions do regional-bilateral agreements impose?
No tariff flexibility, removal of subsidies, stronger investment and intellectual property protections
166
What is the Investor-State Dispute Settlement (ISDS) mechanism?
It allows foreign companies to sue governments over regulations that affect profits
167
What are two key development strategies?
Exploiting existing comparative advantages (e.g. low-wage labor) and creating new comparative advantages (e.g. industrial policies)
168
How did Korea and Taiwan develop successfully?
By using tariffs, subsidies, FDI regulation, weak intellectual property laws, and local content requirements
169
Why is it harder for developing countries to follow Korea and Taiwan’s model today?
WTO and regional-bilateral agreements restrict these industrial policies
170
What are the positive aspects of WTO trade policy for developing countries?
Market access, removal of discriminatory barriers, and a dispute resolution system
171
What trade barriers must developing countries reduce under WTO?
Non-tariff barriers like quotas and import licenses must be replaced with bound tariffs
172
Are export subsidies allowed under WTO?
No, except for limited cases like research, development, and human capital subsidies
173
What is a "safeguard mechanism" under WTO?
A temporary trade restriction to protect industries but under strict regulations
174
What investment policies are banned under WTO?
Local content requirements, export balancing requirements, and most performance-based investment rules.
175
What investment policies are still allowed under WTO?
Joint ventures, technology transfer requirements, and local hiring/training regulations
176
Does WTO eliminate all industrial policy space?
No, but it significantly limits the tools available to developing countries
177
What is the TRIPS Agreement?
A WTO rule requiring all countries to grant 20-year patents, including for pharmaceuticals
178
Can countries issue compulsory licenses for patents?
Yes, but only under strict conditions, such as public health emergencies
179
How can countries maintain flexibility in patent policies under WTO?
By setting stricter patent granting conditions or requiring local manufacturing (e.g. Brazil)
180
How do regional-bilateral agreements compare to WTO in terms of tariffs?
They require tariffs to be lowered even further, often to zero
181
What happens to safeguard measures in regional-bilateral agreements?
They are removed or made ineffective
182
Why are duty drawbacks eliminated in regional-bilateral agreements?
To prevent exporters from getting tax rebates on imported inputs
183
What does "national treatment" mean for foreign investors?
Governments must treat foreign and domestic companies equally
184
What is the "right of establishment" in investment rules?
Foreign firms must be allowed to operate freely in host countries
185
Why are performance requirements banned in regional-bilateral agreements?
To prevent governments from forcing foreign firms to use local suppliers or transfer technology
186
How does ISDS impact national sovereignty?
It allows foreign investors to sue governments, bypassing national courts
187
What are pipeline patents?
They require countries to grant patents on drugs developed before their patent system existed
188
How do clinical trial data exclusivity rules impact generic drugs?
They delay the production of generics by extending market exclusivity for brand-name drugs
189
How are compulsory licenses restricted in regional-bilateral agreements?
They become harder to issue, limiting access to affordable medicines
190
What new patentable areas are included in these agreements?
Genetic materials, plant varieties, and biotechnology innovations
191
What is the key trade-off for developing countries in regional-bilateral agreements?
Preferential market access versus losing industrial policy flexibility
192
Why do some developing countries sign regional-bilateral agreements despite the restrictions?
To attract foreign investment and secure immediate market access
193
How do major economies pressure developing countries into these agreements?
Through economic leverage and diplomatic influence (e.g., US, EU)
194
Why do analysts worry about these agreements?
They may trap developing countries in low-value production rather than allowing industrial upgrading
195
What led to the rise of industrial policy in the 1960s and 1970s?
Industrial policy rose due to the failure of market-focused policies and the recognition of market failures, with governments intervening to correct them, though outcomes varied, particularly in Latin America
196
Why was there a shift away from industrial policy in the 1980s?
The 1980s saw the rise of market fundamentalism and the Washington Consensus, which emphasized government failures and replaced industrial policies with liberalization and deregulation
197
What role did East Asia and Sub-Saharan Africa play in challenging the Washington Consensus?
The success of East Asian economies highlighted the value of industrial policy, while SSA’s declining per capita income and deindustrialization challenged the effectiveness of market fundamentalism
198
How did academic research alter views on market equilibrium and knowledge?
It showed that market equilibrium is imperfect under asymmetric information and risk, and that the gap between developed and developing countries lies in knowledge, which markets cannot efficiently produce or transfer
199
What caused the renewed focus on industrial policy after 2008?
The global recession exposed market failures, and countries like China and Brazil demonstrated the effectiveness of industrial policy, renewing interest even in advanced economies that had always used it, such as in the banking sector
200
How do economists today differ in their support for industrial policy?
While critics of vertical policies prefer broad horizontal interventions like exchange rate management, there is growing recognition that structural transformation requires more targeted strategies
201
What is the emerging consensus on structural transformation and economic growth?
Economic theory emphasizes the role of technological progress—accounting for 70% of per capita income growth—and the importance of reducing gaps between best and average practices through knowledge diffusion
202
Why are markets insufficient to drive knowledge-based growth?
Because markets underinvest in learning and knowledge-intensive activities, industrial policy is necessary to support innovation and diffusion, especially given that knowledge is a non-rival good vulnerable to copying
203
How can industrial policy help overcome both market and government failures?
By supporting institutions like Brazil’s BNDES, which resisted political pressure, and promoting knowledge spillovers and learning even amid poor governance
204
What new considerations does the paper bring to the industrial policy debate?
It emphasizes aligning goals with development levels and endowments, targeting sectors with learning potential, addressing contracting failures, and improving governance capacity for effective implementation
205
What is the importance of dynamic comparative advantage in industrial policy?
Countries should look beyond current comparative advantage and focus on building learning capabilities, promoting innovation, and absorbing technology to sustain long-term development
206
How should governments design venture capital and innovation support systems?
hey must understand the entrepreneurial process to design effective interventions, drawing lessons from Brazil’s BNDES and using a range of development instruments
207
What role can governments play in cluster development and industrial organisation?
Governments are essential in establishing competitive clusters, as seen in DCs, while in China, entrepreneurs self-organized to overcome production constraints
208
What causes the failure of industrial policy in developing countries?
Capabilities failures—such as weak institutions or lack of knowledge—are major obstacles, and policies must be feasible within current governance constraints and designed to improve these capacities
209
What three-stage implementation process do the authors propose for industrial transformation?
1) Assimilate foreign technologies, 2) Learn through co-development or joint ventures, 3) Leapfrog using emerging technologies with support from public-private partnerships
210
How did South Korea use industrial policy for transformation from the 1960s to 1980s?
The government and chaebols systematically studied and addressed missing links in global value chains, enabling targeted industrial upgrading and transformation
211
What are the four neglected theoretical issues in industrial policy identified by Chang & Andreoni (2020)?
The authors identify commitment under uncertainty, learning in production, macroeconomic management, and conflict management as critical but overlooked dimensions in industrial policy
212
Why is "commitment under uncertainty" important for industrial policy?
Productive investments are often irreversible and made under deep uncertainty, so governments must reduce risk through tools like infant industry protection, procurement guarantees, R&D support, and technology standards (e.g. Korea’s CDMA or SEMATECH in the U.S.)
213
How does "learning in production" challenge recent innovation policy?
Learning occurs through production processes, sectoral overlaps, and local ecosystems, yet recent policy separates R&D from production, ignoring that ‘smart’ innovation policy needs ‘dumb’ support to keep firms alive and learning on the job
214
Why must macroeconomic management be integrated with industrial policy?
Macro conditions like high interest rates or overvalued exchange rates can undermine investment; successful cases like Japan and Korea managed macro variables alongside industrial strategies such as import controls
215
How can governments manage conflict arising from industrial policy?
Industrial policy creates winners and losers, requiring reactive measures (e.g. bailouts, restructuring) and anticipatory tools (e.g. targets, safety nets, bankruptcy laws), recognizing that “leaving it to the market” is itself a political choice
216
How have global value chains (GVCs) reshaped industrial policy needs?
GVCs allow entry into manufacturing but often trap countries in low-value roles with limited learning; Chang & Andreoni suggest focusing on broad capability domains like ICT or food processing to enable cross-sectoral upgrading
217
What is the impact of financialization on industrial policy?
The shift to short-term returns has weakened reinvestment at corporate and national levels, while TNCs spread this logic into developing economies, requiring reforms in corporate governance, financial insulation, and incentive structures
218
What is meant by the "new imperialism" limiting industrial policy space?
Since the 1980s, WTO rules, FTAs, and investment treaties have restricted tools like tariffs and SOEs, but policy space still exists via weak enforcement, unbound tariffs, and tools like procurement and R&D subsidies
219
According to Chang & Andreoni, how should industrial policy be reconceptualized in the 21st century?
Industrial policy must reflect uncertainty and learning, align with macro conditions, manage conflicts, and respond to global changes like GVCs and financialization—not by returning to old models, but adapting them with new tools and alliances
