Putting It All Together: How Nations Succeed Through Industrial Policy?
This book narrates a wide range of ideas both vertically (historically) and cross-sectionally (ideas, sectors, countries, case studies). This final chapter presents a summary of key takeaways and policy implications.
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Putting It All Together: How Nations Succeed Through Industrial Policy?
This book narrates a wide range of ideas both vertically (historically) and cross-sectionally (ideas, sectors, countries, case studies). Below is a summary of key takeaways and policy implications. Manufacturing Is (Still) Good While the service sector is the hotbed of employment, manufacturing is the hotbed of technology, productivity, and innovation. It is still the engine of growth. Both developed and developing economies need economic growth and technological development. Manufacturing can help both in different ways. For the developing economies manufacturing is a way to graduate from the list of low-income countries and to break out of the middle-income trap. For developed economies, which are already benefiting from manufacturing in terms of technological progress, growth, and exports, manufacturing can help reduce regional income disparities. Industrialization Has Never Been an Accident; Industrial Policy Is Needed This or that way, there have always been policies to kick off industrialization on the part of governments. Even in the first industrializer, Great Britain, industrial policies before the Industrial Revolution prepared the way for industrialization; and once the Industrial Revolution came, Great Britain did everything to both benefit from it and keep it to itself (e.g. colonial laws). The subsequent industrializers in the nineteenth and
© The Author(s) 2018 M. A. Yülek, How Nations Succeed, https://doi.org/10.1007/978-981-13-0568-9_14
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twentieth centuries (e.g. the USA, Germany, Japan, South Korea) have all employed industrial policies—whether they called them so or not. Industrial policy is still relevant for both developing and developed economies. Industrial Policy and (General) Industrialization Policy Are Not the Same Thing General industrial policy and sectoral (‘picking-the-winner’) policies are relevant at different stages of industrialization. General industrial policy would most probably waste resources at Stages III and IV, as it would be spread too thin. Focused industrial policy is necessary to help a country move to Stage III from Stage II. As most of the world’s countries are at Stage I or II the decision makers should be aware of this distinction. The Government Should Have a Framework to Identify the Strategic Sectors This book proposed four criteria for that: • Value-added potential, which directly feeds into per capita income or its growth rate in the overall economy, • backward linkages, • depth (potential) of LbD, and • depth (potential) of technological learning. Once the strategic sectors are identified, preferably four or five of the top among them should be targeted. As these sectors have linkages, even in the case of wrongly selected sectors, their positive externalities will lead to multiplying social benefits in other sectors. Export-Led Growth Is a Pillar of Industrial Policy Up to the 1980s, many countries tried import substitution. Capitalizing on the government’s
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