Industrial Policy with Conditionalities: A Taxonomy and Sample Cases

In the context of a shift towards longer-term, public-value-oriented economic thinking, there is a real opportunity to reimagine the contracts that structure public-private relationships. Similar reasoning could also be relevant to the relationship between different public entities, such as the relationship between a country’s state-owned enterprise and the Treasury: benefits to the SOE can be structured with conditions to make sure the SOE directs its investments in particular ways, shares knowledge, makes products/services accessible, etc. Redesigning these contracts means redesigning the direction of the economy from the ground up. To succeed, modern industrial policies must be deliberately sustainable, welfare-oriented, and innovation-led; coordinated as a holistic package; and implemented cooperatively across government agencies and with the private and third sectors. The conditionalities written into contracts are a key site for realizing these aims.