Development and Modern Industrial Policy in Practice

Development and Modern Industrial Policy in Practice

Issues and Country Experiences

Edited by Jesus Felipe

Development and Modern Industrial Policy in Practice provides an up-to-date analysis of industrial policy. Modern industrial policy refers to the set of actions and strategies used to favor the more dynamic sectors of the economy. A key aspect of modern industrial policy is embedding private initiative in a framework of public action to encourage diversification, upgrading, and technological dynamism to achieve development in the twenty-first century. The book reviews key questions that policymakers ask about industrial policy, such as: who selects sectors; what is the rationale for sector selection; what are the main tools to promote sectors; what is the role of human capital; and what are the mechanisms for monitoring and evaluation? Expert contributors discuss how to undertake industrial policy effectively and examine the experiences of Australia, the EU, the Republic of Korea, Malaysia, and the US.

Chapter 9: Do as I say, or as I do? US innovation and industrial policy since the 1980s

Matthew R. Keller and Fred Block

Subjects: economics and finance, industrial economics, industrial organisation, politics and public policy, public policy, social policy and sociology, labour policy


Considerable scholarship since the early 1980s has characterized the innovative dynamism of the United States (US) as the result of its embrace of markets, or of its prototypically ‘liberal market economy’ (Hall and Soskice 2001). In these views, markets serve as the central mechanism of economic coordination, while government helps create an ‘innovation environment’ by setting and enforcing the basic rules of the market, such as intellectual property protection, and correcting market failures through investments including public goods such as education, basic research and infrastructure. Under such a framework, innovative dynamism is typically maximized when private firms are insulated from government ‘interference’ and industrial policies are minimal or nonexistent. In parallel, since the 1980s, the dominant political rhetoric in the US has emphasized the economic dynamism and efficiency of markets, while the state is deemed a drag on growth and productivity.

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