5 of 7 people found the following review helpful:
4.0 out of 5 stars
It¡¯s the politics, stupid, April 21, 2003
This review is from: Industrial Policy in an Era of Globalization: Lessons from Asia (Policy Analyses in International Economics) (Paperback)
This booklet is intended not to be theoretical breakthrough or carving out amazing new facts, but to be a policy recommendation in the style of working papers from OECD or IMF which could be downloaded freely from their website.
East Asian developmental states of Japan, Korea, and Taiwan, or their policy tool dubbed as industrial policy garnered enviable encomiums in the 1980s and the early 1990s. There were so many speculations on whether its industrial developmental experiences could be copied into the contexts of other developing countries. World Bank¡¯s ¡®The East Asian Miracle (1993)¡¯ was a good example of such trend. Even the stalwart of lasses-faire capitalism, the States, tinkered with the idea. Government-led establishing of SEMATECH was the instance. Now you can witness the stratospherical-scale experiment in China. But the more-than-a-decade-protracted stagnation in Japan, spectacular debacle of Asian financial crises seeded the suspicion about the model and it blossomed to the full-blown denial at the turn of the century. This monograph is another nail in the coffin.
The industrial policy is the policy set of promotion/protection. The state nurtured target industries which could be internationally competitive to step up the ladder of international comparative advantages. The targeted industry should be protected from the hostile environment up to being internationally competitive, and promoted with directing national resources to that industry. This, of course, bucked the basic premises of market economics with distorting the flow of resources. But authors are not concerned with principles, but whether this policy tool was effective at all. In a nutshell, they are skeptical. According to their econometric data, targeting served to shorten economic recovery, at best. It could be claimed that in the early stage of postwar recovery, the state intervention contributed to some degree. But it¡¯s dubious whether its efficacy could be extended after the initial takeoff stage, in Rostow¡¯s words. The industrial policy is more than economics but it¡¯s the issue of political economy, in other words it¡¯s prone to be captured by vested interests. It¡¯s the de facto consensus that since the 1970s, Japan could not be called as the developmental state: the political economy swayed to negative way to the efficiency of economy since then and it¡¯s the fundamental cause of Japan¡¯s stagnation. The point is summed up as ¡®Two Japans¡¯: the inefficient sectors are parasites on the efficient sectors like electronics, auto. This has dragged the overall efficiency of the economy down. Authors argue that the applicability of industrial policy i.e. promotion/protection is not hindered by WTO regime for there a lot of loopholes available under current rule books. The issue at hand is the efficacy and the political economy. The efficacy is questionable according to data. And it would be next to impossible to overcome the issue of political economy which could insulate the state from the vested interest.
The points this monograph poses are not that unknown. But the manner presenting in the form of literature is the problem of this book. Econometric data are interesting and inspiring. But they are employed to support points. I think they could have organized the points in more straightforward way. Points are scattered, not seamlessly sorted out.
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