In response to my post on China, Bert Hofman of the World Bank writes to me about Indonesia's local content requirements and how they have not achieved anything like China's success. He speculates:
Of course, Indonesia is different than China. But one of the thoughts I had was that the main differences are size of the market and local competition. Even a
country such as Indonesia may not have the scale to make these programs a success, whereas in China the market and the domestic competition is large enough
to use industrial policies such as local contents requirement. The scale of the market promises learning effects, and domestic competition makes them reality.
Possibly. But I think a more important determinant of the success of industrial policy is the willingness of the government to monitor the results and change its policies as needed. Most industrial policy successes I know are the outgrowth of programs that produced poor results initially. Governments had to fine tune them in light of what they learned. A government too close to the industry cannot effectively do this, since the incumbent beneficiaries of the failed policies can block the changes. This is clearly one reason why the Indonesian program failed. But a government that simply watches from afar and keeps firms at arms' length does not accumulate the evidence to be effective either. What is required for the government is something in between--embedded autonomy, to use a term coined by the Berkeley sociologist Peter Evans.
What is your take on empirical studies that show that industrial policies often have a neutral or often negative impact on total factor productivity? I thought that China's success had everything to do with mobilizing underutilized labor and capital?
Posted by: Kenji | June 08, 2007 at 07:57 AM
Is it possible that in instances of successful industrial policy occur when the Government acts as sort of a board of directors?
Posted by: crack | June 08, 2007 at 08:48 AM
I agree with the arguments of Prof. Rodrik. In Indonesia, during the Suharto era, one could hardly distinguish the government from the private industry (most businesses were funded by the President's trust!). True, the fact that nearly 70% of the organized manufacturing was controlled by four conglomerates speaks volumes of the degree of domestic competition. However, this may indeed be a good thing in the early stages of industrialization when resources are scarce and markets are small (This was clearly the thinking behind the industrial licensing policies in both Japan and South Korea). But, I think, the key missing element in Indonesia's industrial policy until the mid-1980s, compared to China or Japan or South Korea, was a lack of emphasis on manufacturing exports (perhaps due to the smooth inflows of foreign exchange generated by the oil and gas industry). China, in contrast, has seen mostly export-oriented foreign investment, which meant that quality considerations were paramount with regard to local supplies (and therefore greater transfer of technology from MNCs to domestic industry and greater learning efforts by the latter).
Posted by: Joe | June 08, 2007 at 09:30 AM
"A government too close to the industry cannot effectively do this, since the incumbent beneficiaries of the failed policies can block the changes...But a government that simply watches from afar and keeps firms at arms' length does not accumulate the evidence to be effective either."
How does this relate to our private health care problems and at what level of intervention should the US government intervene with universal health care so as to not become too little or too greatly involved?
p.s. you should activate blockquote and italics in the comments.
Posted by: Robert P. | June 08, 2007 at 10:17 AM
Indeed, having policy space or even deplolying industrial policies will not automatically bring benefits. Industrial policy can help "get the prices right" but it won't be a success unless one gets the political economy right as well.
The three key elements of success are
1. placing the policy as "close" to the market failure as possible (See Rodrik, 1992 in World Development).
2. "Embedding" the policy-makers with the private sector (this is the Evans argument). This allows firms to "pick losers" less.
3. "Reciprocity". Industrial policies need to be coupled with performance requirements to ensure innovation and that the majority of the benefit does not go to rent seeking (see Alice Amsden, The Rise of the Rest, 2001).
Posted by: Gallagher | June 08, 2007 at 10:19 AM
"But I think a more important determinant of the success of industrial policy is the willingness of the government to monitor the results and change its policies as needed."
A stunning example of this has to be Park Chung Hee's Heavy Industrialisation Drive of the 1970s. Of course, there's a horrible human rights side to it too, that people wouldn't ignore as readily now as they did during the Cold War. Several friends in the offshore construction industry told me how deep government monitoring and control (KCIA too) was in that ministry. Also my favorite Korean poet, imprisoned and emasculated by electrocution. Mentioning Park Chung Hee's name in a Korean university classrooms was certainly to evoke extreme and polarised emotions when I taught there in the 1990s. Peter Evans treats the Korean case as I remember, but Bruce Cumings "Place in the Sun" strikes the right balance between raw economics and the human side, also:
Clifford, Mark L (1994) Troubled tiger : Businessmen, bureaucrats, and generals in South Korea
Woo, Jung-en (1991) Race to the swift : state and finance in Korean industrialization
Yumi Horikane (2005) "The Political Economy of Heavy Industrialization: The Heavy and Chemical Industry (HCI) Push in South Korea in the 1970s," Modern Asian Studies 39, 2. [Superb historical detail on human agency side, based on PhD dissertation work]
Posted by: jonfernquest | June 08, 2007 at 09:46 PM
I could only relate to the classic linear stages of growth model of Rostow and Harrod-Domar to understand why industrial policy fail in most developing countries.
It would appear that the assumptions on the stages of growth model that with savings and investment a take-off period may be experienced by a nation remains to be a myth. In fact, the World Bank in 1998 claims that the poor economic performance of developing countries is not only a result of a financial gap but by an institutional gap, and I believe this is a major constraint of our country, the Philippines, and where the present Administration is focusing on major reforms in key areas on fiscal administration; trade and investments.
Posted by: Shiela dela torre | June 11, 2007 at 03:22 AM
Would Singapore be considered as successful Industrial Policy? Its tiny, has no resource, and virtually no domestic market. The government has a stake in many of it's successful enterprises.
Posted by: crack | June 11, 2007 at 11:44 AM
All fascinating stuff, but I confess to a degree of scepticism about a lot of cross-country research - there are too many differences between countries to make the results of such work always convincing. I would be more interested in within-country research focussing on how policy changes over time are reflected in economic outcomes.
Posted by: gordon | June 11, 2007 at 07:56 PM
People usually say :"Seeing is believing." http://www.tt88times.com
Each attempt has a corresponding gain, in part or obvious, or vague. At least we have the kind of satisfaction After I bought this watch ,in a sense,it means a great deal to me. http://www.fashionhairfu.com
Posted by: rolex watches | April 19, 2010 at 09:15 PM
At present this season's jewelry,but nowadays one of personal adornment first!
Posted by: tiffany jewelry | April 27, 2010 at 04:22 AM
The good news, thank you!
Posted by: Nike Air Jordan | May 16, 2010 at 07:05 AM
So, some tip about this issue are welcome and really sorry if my question is very simple. Thanks in advance
Posted by: replica handbags | May 29, 2010 at 05:43 AM
I like these articles , democratic countries formulate policies are both team and the interests of the people of power, but the undemocratic countries rarely for the interests of the people, http://www.jerseysky.com it is the sorrow of many democracy, I like the western and northern state policy.
http://www.cheapsaleing.com
http://www.nikeairmaxshoe.ocm
Posted by: lachou | July 26, 2010 at 04:18 AM
I am a senior student, I Love your blog as i love study english, I learn much from this post, i ths very much.
Posted by: Moncler | August 15, 2010 at 10:17 AM
I am a senior student too, I Love this post as i love study english, This article is to my feelings, thanks for your sharing, hoping to see more useful content, refueling
Posted by: mbt shoes | August 18, 2010 at 09:44 AM
Extremely great post, really beneficial stuff. Never thought I’d find the facts I would like in this article. I’ve been looking all over the net for some time now and was starting to get irritated. Thankfully, I stumbled onto your website and received exactly what I was looking for.
Posted by: jordan shoes for sale | August 24, 2010 at 01:40 AM
It's good to see this information in your post, i was looking the same but there was not any proper resource, than now i have the link which i was looking for my research.
Posted by: jordan shoes | August 24, 2010 at 10:50 PM
Action Handling Equipment Ltd is one of the most trusted names in the UK when it comes to material handling equipment, lifting equipment, office supplies, industrial weighing equipment, packaging and warehouse equipment.
Posted by: Lifting Equipment | September 28, 2010 at 02:49 AM
Action Handling Equipment Ltd is one of the most trusted names in the UK when it comes to material handling equipment, lifting equipment, office supplies, industrial weighing equipment, packaging and warehouse equipment.
Posted by: Lifting Equipment | September 28, 2010 at 02:49 AM
Thank you for sharing to us.
Please one more post about that..
Posted by: Finpecia | November 16, 2010 at 03:12 AM
raf
Thanks for sharing.
Posted by: Account Deleted | January 22, 2011 at 05:24 PM
Wow, nice post,there are many person searching about that now they will find enough resources by your post
Generic Viagra
Posted by: Account Deleted | April 05, 2011 at 08:16 AM
Great information, you have a wonderful blog and an excellent article!!
Regards,
Generic Viagra
Posted by: Account Deleted | April 06, 2011 at 04:40 AM
Hola,
Realmente buen trabajo, hay muchas personas en busca de eso ahora van a encontrar suficientes fuentes por tus consejos.
También se espera para más consejos acerca de que,
Regards, メファキン
Posted by: Account Deleted | April 11, 2011 at 03:56 AM
hey buddy,this is one of the best posts that I’ve ever seen; you may include some more ideas in the same theme. I’m still waiting for some interesting thoughts from your side in your next post.
Generic Viagra
Posted by: Account Deleted | April 13, 2011 at 06:29 AM
Hie primum ipsum visitabo hic. Ita multi inveni in vasa interesting maxime Weblog eius discussionem. Tons de tuis commentationes articles, suspicor non sum solus omnem habens fructum praesens est! sustine bonos vsus.
Regards,
Ports Automation
Posted by: Account Deleted | April 26, 2011 at 04:14 AM
Skönt att vara besöka din blogg igen, har det varit månader för mig. Väl här artikeln som jag har väntat så länge. Jag behöver den här artikeln för att slutföra mitt uppdrag i kollegiet, och den har samma tema med din
Generic Levitra |
ttp://www.bellspharmacy.com/maincategory/7/generic-levitra.html
Posted by: Account Deleted | May 16, 2011 at 08:07 AM
Raf
raf
Thanks to you ...
Posted by: Account Deleted | June 01, 2011 at 03:14 AM
I have wanted to learn more about particular topics, but not many websites would help me out in informing me the way I expected. This left me with many question, but after reading your article, I got an answer to all my questions. You are too cool dude!!!
Regards,
Generic Drugs Exporter
Posted by: Account Deleted | June 21, 2011 at 07:20 AM
Thank you for sharing to us Please one more post about that..
http://www.onlinemedicalstore.net/allergy-atarax-hydroxyzin-c-1_23/generic-atarax-hydroxyzin-25mg-p-9
Posted by: Account Deleted | June 22, 2011 at 04:08 AM
Be Nice to visiting your blog again, it HAS been months for me. Well this article that I've been waited for long with. I need this article we complete this assignment in the college, and it Has Sam topic with your article. Thanks, great share.
Caverta
Posted by: Account Deleted | June 23, 2011 at 02:00 AM
I need this article to complete my assignment in the college, and it has same topic with your article. Thanks, great share.
http://www.bellspharmacy.com/category/5/silagra.html Silagra
Posted by: Account Deleted | June 30, 2011 at 12:09 AM
Wow, nice post,there are many person searching about that now they will find enough resources by your post
http://www.onlinemedicalstore.net/allergy-allegra-fexofenadine-c-1_10
Posted by: Account Deleted | July 02, 2011 at 01:59 AM
hey buddy,this is one of the best posts that I’ve ever seen; you may include some more ideas in the same theme. I’m still waiting for some interesting thoughts from your side in your next post
http://www.buymedicinesonline.us/desyrel-16-142.html
Posted by: Account Deleted | July 02, 2011 at 04:44 AM
I think Chinese success was able because China has communist government - this is a best choice for developing countries.
John
http://potenzmittelwien.at/silagra-kaufen-austria.html Silagra kaufen
Posted by: Scarfbuy | July 03, 2011 at 10:35 PM
Many places and centers offer business and trade promotions to both buyers and supplier.What about the differences in skill intensities across industries? The job losses in the relatively unskilled-labor intensive battery industry should have little effect on the relatively skilled-labor intensive machinery
sexshop
sexyshop
sexshop online
Posted by: Account Deleted | July 20, 2011 at 08:53 AM