Does the greater embrace of industrial policy globally signal the emergence of a New Washington Consensus? We show that the multiplication of industrial policies, while consequential, signals neither normalisation nor consensus. Rather, industrial policy is increasingly the object of contestation over norms and practices of state interventionism. To substantiate our argument, we first analyse two competing attempts to articulate hegemonic visions of industrial policy, development, and world order: a ‘conservative’ vision formulated by the WTO, OECD, World Bank, IMF, and a ‘transformative’ project led by Southern powers through the G20. We then investigate whether developing countries possess greater industrial policy space. While some ideational and legal constraints have been loosened, a state's capacity to autonomously design and implement industrial policy remains shaped by its relative position within global financial and monetary hierarchies, its insertion into global supply chains, and its strategic positioning vis-à-vis emerging geopolitical competition. Rates of policy adoption and policy tools are, therefore, diverging. Advanced economies extensively deploy industrial policy with relative ease, geostrategically important emerging economies enjoy selective flexibility to pursue industrial policy, yet low-income countries are at risk of further marginalisation. This ‘three-tiered’ hierarchy is both a reflection and an outcome of contestation over industrial policy.
Policy Implications
- Developing and emerging market economies can use global platforms like the G20 to institutionalise permanent industrial policy working groups and advocate for global frameworks that support inclusive green industrialisation.
- Global economic governance institutions—including the IMF, World Bank, and WTO—should ensure that efforts to develop a shared consensus on industrial policy explicitly account for the developmental needs of lower-income and marginalised countries, by incorporating principles of equity, flexibility, and special and differential treatment into emerging frameworks.
- Enhancing the ability of developing countries to design and adopt industrial policies of their own choosing will involve skills and technology transfers from technologically advanced economies, as well as a reform of the international debt and financial architecture.
- The US-China-EU subsidy race offers potential opportunities for emerging economies to secure policy space alongside investment, technology transfers, and trade concessions through strategic 'polyalignment'.
- To prevent the risks of ‘beggar-thy-neighbour’ policies between developing countries, and to pool resources, mechanisms for transnational and regional cooperation could be put in place to synchronise and coordinate industrial policymaking.
Photo by Khimish Sharma