World Bank Reverses Stance, Endorses Industrial Policy for Economic Growth
The World Bank, long considered the intellectual center of the Washington Consensus and a staunch opponent of state-led economic intervention, has admitted its previous stance was incorrect. In a significant policy reversal, a new report argues that industrial policy, when implemented effectively, is an essential component of national economic success. This marks a departure from the bank's 1993 'East Asian Miracle' report, which attributed the rapid growth of economies like South Korea and Taiwan to free-market policies rather than government intervention. The shift acknowledges that protecting infant industries through public investment and trade restrictions can help developing nations build competitive sectors. Jake Sullivan, former U.S. national security adviser, highlighted the magnitude of this change, noting that the primary authority on development economics has conceded that much of the established wisdom regarding prosperity was flawed. This turnaround reflects broader global trends, including rising skepticism toward globalization and supply chain vulnerabilities exposed during the pandemic, signaling a new era where government intervention is viewed as a legitimate tool for economic development.
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World Bank Reverses Stance, Endorses Industrial Policy for Economic Growth
The World Bank, long considered the intellectual center of the Washington Consensus and a staunch opponent of state-led economic intervention, has admitted its previous stance was incorrect. In a significant policy reversal, a new report argues that industrial policy, when implemented effectively, is an essential component of national economic success. This marks a departure from the bank's 1993 'East Asian Miracle' report, which attributed the rapid growth of economies like South Korea and Taiwan to free-market policies rather than government intervention. The shift acknowledges that protecting infant industries through public investment and trade restrictions can help developing nations build competitive sectors. Jake Sullivan, former U.S. national security adviser, highlighted the magnitude of this change, noting that the primary authority on development economics has conceded that much of the established wisdom regarding prosperity was flawed. This turnaround reflects broader global trends, including rising skepticism toward globalization and supply chain vulnerabilities exposed during the pandemic, signaling a new era where government intervention is viewed as a legitimate tool for economic development.
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