HKS Authors

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Ford Foundation Professor of International Political Economy


After a period of decline in interest and premature predictions of demise, industrial policy is back on the scene. A variety of trends have contributed to the renewed interest. In the developing world, there has been a pushback against the market-fundamentalist approach, typically associated with the Washington Consensus. Even when growth rates have been high, economies in Sub-Saharan Africa and Latin America have experienced unsatisfactory rates of productive transformation and shortfalls in generating quality jobs in manufacturing or modern services. This has created a demand for proactive government policies to diversify and upgrade economies beyond simply freeing up markets. In the advanced economies, generalized labor market malaise and the lingering effects of the financial crisis have produced similar effects. Low growth dynamics occurred especially in the euro zone, as countries with trade and budget double deficits with a common currency struggled to come out of the crisis. The continuing decline in the employment shares of manufacturing in the USA and Western European countries and the increasing competitive threat posed by China on world markets have pushed in the same direction. Interest in industrial policy is being further stimulated by disruptive technological change—from automatization to digitalization, industry 4.0, and the Internet of things.


Aiginger, Karl, and Dani Rodrik. "Rebirth of Industrial Policy and An Agenda for the 21st Century." Journal of Industry, Competition and Trade (January 2020): 1-19.