Chapter

How can Low-Income Countries Accelerate their Catch-Up with High-Income Countries? The Case for Open-Economy Industrial Policy

Robert H. Wade

in Good Growth and Governance in Africa

Published in print December 2011 | ISBN: 9780199698561
Published online May 2012 | e-ISBN: 9780191738142 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199698561.003.0008

Series: Initiative for Policy Dialogue

How can Low-Income Countries Accelerate their Catch-Up with High-Income Countries? The Case for Open-Economy Industrial Policy

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A senior British civil servant working on economic issues declared in late 1930 (as the Great Depression ground on), “If I leave the office on Saturday feeling confident that in the past week I have done no harm, then I am well content.” The descendants of this breed of “do no harm” civil servants and its neoclassical economist counterpart forged the Washington Consensus world view about appropriate development policy in the 1980s, which has dominated “global policy” on development ever since. In post-war East Asia, however, civil servants and economists espoused a more activist role of the state, as in the slogan displayed in the entrance to the Industrial Development Bureau in Taipei (Republic of China): “The most important thing in life is to have a goal, and the determination to achieve it.” This essay examines the economic arguments against and for a more activist role of the state in giving directional thrust to the economy, and presents some considerations to guide the institutionalization of such a role.

Keywords: industrial policy; catch-up; Washington Consensus; FDI; good governance; developmental state; corruption

Chapter.  12210 words. 

Subjects: Economic Development and Growth

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