FREE MARKETS
Trump may erode the case to be made for industrial policy
The direction Trump is taking looks suspiciously like the kind of industrial policy that leads to opportunistic behaviour by private interests, writes Trudi Makhaya
The case against traditional industrial policy mainly rests on the proposition that governments are not well-suited to pick winners in the economic race. If by industrial policy it is meant that a government sets aside incentives and resources to develop specific sectors, then the argument goes that this will fail because the information required defies bureaucratic planning. It is the market, co-ordinating producers, financiers and consumers, that will direct resources to their most optimal use in the right industries. The counterargument has been to point to successful instances of governments promoting specific industries through targeted policies. East Asian countries such as South Korea, Japan, Singapore and Taiwan are recent examples of such state-directed economic achievement. The economies of the West have also been shown, notably by economists Ha-Joon Chang and Mariana Mazzucato, to rely on industrial policy tools for development. Government-sponsored research and developme...
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