Does It Make Sense to Have an Industrial Policy?

Whenever an industry runs into trouble — and especially when it starts hemorrhaging jobs — demands for support and subsidies are heard. But does having an industrial policy really make sense?”

This interview , at Knowledge@Wharton, with Howard Pack, a professor of business and public policy at Wharton indeed does  lot of plain speaking in terms abuse of the policy interventions by the Governments.

But that is not the reason why I have re-posted it here!

The interview has ended on somewaht ambivalent note when it came up with the issue of handling market failures vis-a-vis policy interventions. First what is said in the interview:

Knowledge@Wharton: One final question: You’ve made a very compelling case that the results from industrial policy are quite mixed, and there are strong grounds for skepticism. Again, instead of being interventionist, in the absence of industrial policy, what can be done to deal with market failures?

Pack: For the kinds of things I was talking about earlier — namely, training takes place, firms pay for it, and then other firms benefit from it — you do need tax and subsidy policies. But you have to identify where the failure is and address the specific failure…. That is really different from a generalized, blunderbuss industrial policy where you say, “Let’s protect an entire industry,” rather than trying to target the particular sources of market failure.”

Well, we have three of the classic cases – 2G spectrum distribution, licensing of coal mines and licensing of Iron Ore Mines, where apperently the Policy  blatantly was seen to favour the [private] industry Well, the Government policies were meant for that purpose only when suddenly CAG and Judiciary spoil the game!!!!????

Obviously, there are hardly any noticeable resposnes from the quarter that matter.

But none the less the future outcomes would make intersting study.

And, hence the re-blogging of the interview.

Refrence, with due acknowledgements:

3 Replies to “Does It Make Sense to Have an Industrial Policy?”

  1. At the rate of present goings-on across all countries, governmental intervention still appears to be driven by some or other vested interest and has a parochial vision.
    In India, we have an old saying that one eats by one’s own hands, the hands would tend to find one’s own mouth only.
    Hence, I may be permitted to vent my apprehension for an unbiased reserach into the intended and unintended benefits of any governmental intervention.

  2. The 2007 “sub-prime” tsunami has swept aside all the pretences of free enterprise in almost each of the ‘capitalist’ bastions.
    Now Japan also joins India’s “Air India” league in the form of TEPCO.
    Do the Governments, indeed, have no choice? OR Are they dumb enough to take the bait?
    Debate goes on……….

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