Government intervention in the economy to promote particular industries or sectors. The label was once reserved for big ideas such as import substitution, where states ban trade with foreign countries to nurture domestic industries until they are strong enough to compete on an equal footing. Over the past decade the list of policies counted as intervention has lengthened.
The World Bank's 2026 report "Industrial Policy for Development" distinguishes two main categories. "Market incentives" include subsidies for startups, import restrictions, local-content requirements, consumer subsidies and tariffs. "Public inputs" include government spending on electricity, water, transport, industrial parks and worker training. Public inputs are generally less distortive, though even building a road helps manufacturers more than tech startups.
In the 1960s and 1970s many African countries undertook similar industrial experiments to East Asia's policies. For a time they grew at a similar pace. Yet from the mid-1970s it became apparent that policymakers in Africa had placed the wrong bets. When these blew up, the resulting crisis-ridden decade eventually led the World Bank and IMF to codify the Washington Consensus—free markets, sober fiscal policies and private enterprise.
The World Bank's 1993 "East Asian Miracle" report grudgingly admitted that the growth of Japan and South Korea may have been aided by governments' picking of industrial winners, but warned that the promotion of specific industries "holds little promise" for others.
Of the 183 countries assessed by the World Bank's 2026 report, each had at least one industrial policy in place. Kenya hopes to nurture a tech industry behind a wall of subsidies. Indonesia has banned the export of many raw commodities. Of the Bank's economists covering its 189 member countries, four in five have been asked by governments to advise on industrial policies.
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