Read Dani Rodrik on principles for industrial policy in developing countries, ‘Industrial policy

for the twenty-first century’ Harvard University’s website.

Do you think this more active approach has served the East Asian economies well? Discuss
here.

The debate that Rodrick addresses on his work it is very interesting, enabling the discussion
about the objectives and perspectives of industrial policy for our twenty-first century
economies. The East Asian economies cases showed in Rodrick’s work explain how a well-
coordinated public-private relationship could enhance the economic development and
promote the diversification of the exports of an economy. China, Japan, Taiwan and South
Korea are successful cases of industrialization.

I agree with this more active approach of industrial policy showed in the paper. Especially
when we consider the information and coordination externalities involved in the process.
Tackling that issues means an active, transparent and qualified government intervention
towards an innovate economy that is able to improve new sectors with a positive market
shaping attitude.

I also agree with the comparison that the author makes between East Asia and South America.
For example, here in Argentina we have many problems with “identifying the losers” when it is
referred to industrial policy subsidies or tax benefits. A very controversial case in my country is
the tax benefit regime for electronic industry of “Tierra del Fuego” (an argentine province).
The results of the regime were very poor in terms of competitiveness and efficiency of the
firms that appeared, but many politicians do not want to accept the bad economic results. We
lose approximately 1 billion dollars each year in terms of tax benefits to this electronic firms.
Meanwhile a lot of experts and economist are insisting the usefulness results of the program.
The main problem is the inefficient way that the government is monitoring this type of
industrial policies when it is obvious that you need the ability to cut in the cases that it is not
going well. It is literally like the example that Rodrick gave in his paper about the “carrot” and
the “stick”. The issue is that in South America industrial policy it is easy to give carrots but it is
probably that the stick will be forgotten by the government as a part of the challenge.