1. Market-led explanation for successful industrial development Market-led development – Loosely associated with “Washington Consensus” – Long history Adam Smith’s Wealth of Nations (1776) – Main claims Minimal government – Provide order, protect property rights, enforce contracts, provide basic infrastructure, provide basic education » Government should not finance or own firms » Government should not use taxes to manipulate firms’ behavior Free markets – Firms should be free to enter/exit the market – Prices should be free to reflect supply and demand » Government should not provide subsidies Free trade – Goods should flow freely across borders » Government should not employ tariff barriers, other obstacles to free trade

2. State-led explanation for successful industrial development State-led development – Loosely associated with “Beijing Consensus” – Long history Friedrich List’s, National System of Political Economy (1841) – Main claims State-led industrialization is key element in establishing an independent national state and economy Active government and industrial policy – “Infant” industries require government assistance » Protection from competition » Assistance with capital accumulation » Assistance with technology acquisition Technocratic bureaucracy – Effective government assistance requires competent bureaucracy » Historically conditioned, hard to build

3. Industrial policy Definition – “coordinated government action aimed at directing production resources to domestic producers in certain industries to help them become more competitive (Tyson as cited by Stiglitz) ” – Shape a country’s relationship to the global economy – Gereffi, p.23 – ISI and EOI are examples of industrial policies

4. Tools of industrial policy Tariffs to protect targeted industries Tax holidays for targeted industries Subsidized inputs (especially credit) for targeted industries State-owned enterprises in targeted industries Exchange rate manipulation to favor targeted industries

5. Technocratic bureaucracy – Merit/skill-based recruitment  technocrats, specialized state agencies – Monitoring of technocratic performance – Performance-based rewards Competitive salaries, performance-based promotion – Insulation from direct societal pressures – Power to formulate and implement policy – Belief in bureaucratic mission