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Thepurpose of this paper is to examine whether industrial policy has any place inindustrialization and economic development of developing countries in the newworld economy. We will argue that the answer to this question depends on the developmentobjective of the country and the role envisaged for international trade.
If therole of international trade is to achieve the objective of the integration ofdeveloping countries into the world economy purely for the sake of integration,the industrial policy is irrelevant. By contrast, if development is theultimate objective of their integration to the world economy what is irrelevantis the current dominate economic
philosophy and the international rules which govern trade and development. Suchrules facilitate globalization but they are not particularly conducive toindustrialization and development of developing countries.We have beenwitnessing two contradictory developments in the world economy andinternational policy during recent decades. On the one hand, the need forsophisticated trade and industrial policies has increased; on the other handthe economic philosophy has changed against government intervention in theeconomy.
The need for industrial policy has increased because the international markethas become increasingly more concentrated; global production, internationaltrade and technology have become more and more dominated by TNCs; technologicalchanges have accelerated and production has become more knowledge-intensive.The policy
space of developing countries has, however, shrunk due to the dominant views ofthe orthodoxy. Such views have been reflected on the conditionalities, imposedon many developing countries by International Financial Institutions (IFIs) orbilateral donors and to a large extent on GATT/WTO rules. More recently, theyhave been propagated through “Washington Consensus”.