The post-Washington Consensus has emerged recently as an umbrella denoting the search for pragmatic and context-specific solutions to problems of developing countries. The recent financial crisis, with its epicenter in the rich economies, has demonstrated that the whole world, not just poor countries, is developing. One feature of the new pragmatism is that industrial policy is back. But in contrast to import substitution, it is an open economy industrial policy – the objective is to increase economic openness: enhance flows of knowledge, foster productive innovation, and promote non-traditional exports. Under rubrics such as productive development policies or innovation strategies, governments in developing countries are providing public inputs, each customized and bundled to suit the needs of particular domains of economic activity, but not others.
How are we responding? One way to understand the World Bank’s role in articulating the post-Washington consensus is to imagine a pyramid. At the top are the ‘thinkers’ of DEC, the Bank’s research and data arm. There are encouraging discussions on new structural economics (Justin Lin), empirical work on new trade theory, and – as one would expect – a new open industrial policy. At the foundation are task managers of lending operations. By being responsive to the needs of the client, but without much fanfare, they are in the forefront of the post-Washington consensus in their dialogue with our most sophisticated and demanding clients such as India, China, Argentina, Mexico, Russia, Malaysia or Chile. A new generation of lending technology and innovation operations is quietly emerging which emphasizes selectivity and focus on a few domains and sectors of the economy deemed strategic rather than the across-the-board focus on innovation climate. Practitioners take the need to make ‘’strategic bets” for granted (‘’the entry costs are high, technology is changing rapidly, one can’t do everything, we need to be selective”), so the issue here is to design private-public institutions to share risks and minimize state capture. New institutions of open industrial policy are being self-discovered on a daily basis, yet there is too little contact between the new theory (‘thinkers’) and cutting edge practice (‘doers’).
A middle layer – the World Bank Poverty Reduction and Economic Management or PREM anchor – can become critical in linking the ‘thinkers’ and ‘doers’ by blending cutting edge analytical advances with emerging practices. There is a thus diversity of new developments. Problem-driven political economy issues embodied in GAC (Governance and Anticorruption strategy) are an attempt to establish a context-specific and pragmatic ‘good enough’ governance agenda which takes clientilistic networks and vested interests as facts of life to be managed rather than eradicated. Competitiveness and cluster work in the Trade department establishes a sub-national dimension of open industrial policy. Innovation and growth work of PRMED focuses mainly on the innovation dimension. We are giving up euphemisms (for instance, we are talking about political economy rather than governance), and becoming less ideological and more practical. But in order to become more pragmatic (which, after all, was the major thrust of the Growth Commission), we need to ensure cross-fertilization of these promising developments. For instance, a serious discussion on industrial and innovation policy – i.e. one which adds value for practitioner – requires a problem-driven political economy analysis (as management of vested interests is truly a central cross-cutting problem).
Three organizational vehicles to facilitate such cross-fertilization appear to have emerged. A first one relates to small units (such as the Work Bank Institute’s (WBI) former Knowledge for Development program) at the organizational periphery. It is what we might call lateral cross-fertilization. Expertise developed in such units blends the operational and analytical perspectives where the dichotomy between operational lending and analytical work is blurred, resulting in rare figures of 'thinking doers' (self-reflecting practitioners) and ‘doing thinkers‘ (who write papers on the basis of their continuous involvement in the ‘policy making kitchen'). One could argue, for instance, that the main value of WBI used to be precisely in such integrative figures and functions. Yet a Weberian bureaucracy views such units as inefficiency and duplication: they are removed, as organizational fat, with every budget cut.
A second organizational vehicle relates to cross-support to operational tasks. Not just any cross-support, but ‘cross-boundaries’ support: analytical staff adding value to lending teams on a continuous basis over the whole project cycle rather than one-off engagements. Here again, problem-driven political economy is a good practice by design. Focus on specific problems assures that articulation of relevant analytical work (sometimes judgment-based and far from rigorous) is performed by operational task managers. But such a practice remains an unsung hero and an exception as this type of cross-support is viewed more as a hobby of staff rather than a core requirement (contrast this with an exigency to generate two thirds of one’s work program through cross-support in some central units a decade ago).
A third vehicle relates to team effort to bring together ‘thinking doers’ and ‘doing thinkers’ to produce edited volumes. A key value of World Development Reports (WDR) – a very relevant example here – lies in such blending of perspectives which the World Bank Group is uniquely positioned to provide. Continuing with this initial example, should one think, for instance, about a WDR on Open Industrial and Innovation Policy?
These are some of the questions of the World Bank’s knowledge agenda. So-called internal ventures (combining a certain autonomy and a mandate to innovate) are the usual way to unleash new practices in large bureaucratic organizations. But without coordination and cross-fertilization, such ventures are at a risk becoming ‘independent fiefs’. “Only connect” – the famous E.M. Forster motto remains valid and it is at once humble and ambitious. Humble, because the organizational vehicles to foster connections have already emerged. And if strengthened, the impact of the internal ventures would multiply, permitting us to be more ambitious in the long run.
- Innovation