Industrial policy

From Academic Kids

An industrial policy is any government regulation or law that encourages the ongoing operation of, or investment in, a particular industry. It is often related to, or wholly determinant of, investment policy for that industry.

An active intervention in industrial development is the policy of most if not all countries in the world. Even the United States, which prides itself as a "free-trading" nation, has implemented strong tax, tariff, and trade laws to "protect itself" from "dumping", which is the provision of an industrial subsidy by a competing nation to make products for export.

In Japan, the powerful MITI has often taken an active hand in development of major industries, particularly electronics and software. The impact of this intervention is disputed, as Japan is still not a power in software, and has lost much of its advanced electronics industry to Asian Tigers, especially South Korea and Taiwan.

Despite the claim that policy was aimed at developing world-class competitors, this is difficult to reconcile with the minimal impact that an active industrial policy has had on immigration policy. Presumably, the nation that seeks to become the global leader in a particular industry must attract many of the most qualified talents in that field, to apply and to improve their own particular individual capital to that problem in that country. Historically, this didn't happen, and the relationship between the immigration and industry-protection rules was at best ambiguous. This suggests strongly that the real purpose of industrial policy was always and only protectionism, the protection of existing jobs for political gain.

Today most industrial policy is subordinated to tax, tariff and trade rules of the General Agreement on Tariffs and Trade (GATT) and various trade pacts promising various degrees of "free trade", which in practice means limited subsidy and no protectionism of any one industry.

However, notable exceptions including agricultural subsidies in both Europe and the US, and cultural subsidies in Canada, prove that the principle of industrial policy is alive and well, and merely retreating into the shadows.

See also


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