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After long suffering from benign neglect
if not outright contempt, industrial policy is almost
fashionable again. The global financial and economic crisis
known as the Great Recession has forced researchers and
policy makers to confront the reality that market forces
alone generally do not lead to (constrained)
Pareto-efficient outcomes. Many important national and
global policy objectives (equality of opportunity for all
citizens, financial stability and inclusion, environmental
protection and pollution control, etc.) are simply often not
reflected in market prices and not achieved by markets on
their own. In addition to traditional justification for
industrial policies -- dealing with externalities and
coordination issues economists and policy makers now
acknowledge the need to foster learning at the level of each
economic agent and throughout society and the ultimate
responsibility that the state must bear in that crucial
process. But converting the now widely accepted theoretical
principles of industrial policy into practical frameworks
for concrete government action is indeed a daunting task
everywhere and perhaps more so in the African context where
the institutional underpinnings of effective government are
often not as strong as one might have hoped. This essay
highlights the intellectual foundations and broad principles
of good industrial policy, outlines the contours of the
policy agenda, and fleshes out the lessons learned. It
argues that there has been substantial progress on the
understanding and acceptance of industrial policy and that
Africa could benefit enormously from it and from the
unprecedented new opportunities brought to light by a
multipolar world.
