Six Steps for Strategic Government Intervention: A response to 'After the Crisis: Industrial Policy and the Developmental State in Low-Income Countries' by Robert Wade

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Journal Issue: 
Vol. 1, Issue 2, May 2010
Author: 
Robert Wade

The current global economic crisis has been disastrous for many millions of people. But it has also had the desirable effect of prompting a little more skepticism towards the economic beliefs that have constituted the mainstream view about public economic strategy for the past three decades, both in the major western states and in international lending organizations like the World Bank and the IMF.

Policy Implications: 
Liberalizing markets, attracting FDI and promoting good governance are not necessary conditions of long-term economic growth and development in low-income countries.
In the wake of the global financial crisis and the impending surge of new technologies, the role of industrial policy – promoting some sectors or products ahead of others – should be expanded.
Import replacement as well as export orientation are crucial components of a successful industrial policy.
Four organizational features are important in a developmental state: (1) an even balance between the state and business groups; (2) a public service mindset among state officials; (3) delivery of patronage resources separately from the economic bureaucracy; and (4) an industrial extension service, with tight limits on its officials' discretionary control of resources.
Developing country governments and firms should be prepared to push back against the shrinking latitude for industrial policy instruments allowed in international trade and investment agreements.
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Journal Issue: 
Vol. 1, Issue 3, October 2010
Author: 
Justin Yifu Lin

Professor Robert Wade’s article, ‘After the Crisis: Industrial Policy and the Developmental State in Low-Income Countries’, is a bold and thought-provoking exposition of his long-held ideas on the political economy of development and the dynamics of structural change. I agree with much of what he suggests but would like to offer a couple of nuances on the relative roles of the market and the state in the process of economic development, and then suggest a framework for conceptualizing and operationalizing successful government intervention.

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