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A Pragmatic Look at Making Industrial Policy Work

Ha-Joon Chang's picture

Ha-Joon Chang is an Economist and a Reader in the Political Economy of Development, Faculty of Economics at the University of Cambridge.

After decades of debates over the pros and cons of industrial policy, there's a growing interest among academics and policy makers in moving from ideology to pragmatism. One expert on the topic is Ha-Joon Chang (Faculty of Economics, University of Cambridge), who has written a number of widely debated policy books on state intervention, institutional economics, and industrial, trade and technology policies. He contends that once we accept that industrial policy will always exist at least implicitly – and that it can work well – we can start looking for ways to make it work better from a pragmatic point of view.

 Shipbuilding in Ulsan, Korea. Photo credit: Flickr @Joel Burslem (http://www.flickr.com/photos/leojmelsrub/)

In an interview with the JKP, Chang suggests that step one is for countries to have a vision – like Japan did with cars, Finland did with high-tech, and South Korea did with shipbuilding and steel-making. But unlike in the past, countries can now take on just one part of the manufacturing process, as Thailand is doing by producing engines for Toyota, thanks to the "global value chain." So where does job creation fit in? He underscores that while new manufacturing technology is often criticized for its limited potential to create manufacturing jobs, this ignores the indirect job creation effect, which can be even more important.

This post was first published on the Jobs Knowledge Platform.