Industrial policy back in the Economist

At the risk of being a cracked record, countries need to consider industrial policy anew. Interestingly even the Economist is looking at industrial policy arguments and is willing to engage in debate on the issues. A new column discusses recent papers by Rodrik and others being relatively open to the arguments made about positive versus negative paths of innovation. 


However the slight bias for the Economist comes out towards the end ...

In effect, Mr Rodrik and others are arguing that industrial policy requires disinterested, benevolent policymakers who can do it well. Unfortunately, they do not yet have a recipe for how such policymakers can be created. Policy is made by real people with political and personal motivations. What they come up with is unlikely to be as well designed as the ones in the models.

Rodrik has argued elsewhere that industrial policy is an ongoing dialogue and depends on input from industry as much as from policymakers. But I am struck by the argument as it could be reflected into the economy generally. The market is embedded in society, designed and bounded by the laws of each country and a set of norms (those criticised by Ed Milliband in his recent Labour Party conference speech). If policymakers cannot be expected to be perfect designers of industrial policy, let's not assume that financial engineers and captains of industry are perfect decision makers either. 


How can such policymakers be created? Well in the UK a step forward is to provide stronger training, as with the new Blavatnik School of Government opening at Oxford, and to have a more transparent policy process that engages a broad conversation rather than trying to keep everything under the covers. By taking us away from the images of Sir Humphrey and into a more professionalised policy process we can hope for better outcomes.


In the meantime let's be grown up and have a realistic conversation on industrial policy that is not trapped in the tropes of the 80s. 


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