From the 1950s to the 1970s, particularly in Africa and Latin America, many industrial policies failed because they were used inappropriately, with poor sequencing, and were often driven by political considerations or corruption rather than economic analyses or strict efficiency grounds. In Latin America, often the industrial policies were kept in place too long, and were too inwardly focused on small domestic markets, neglecting the need to develop international competitiveness. In contrast, the political economies of East Asian countries included institutions that tended to enforce stricter rules for which industries got subsidies and trade protection, and which got cut off from them when they failed to meet performance targets. They also adopted a more outward orientation in their industrialisation strategies. Crucially, this history says more about how industrial policies should be implemented -- not if they should be implemented at all.
But some nations are increasingly rebelling against such constraints. Coalitions of developing countries within the WTO, such as the G33 and NAMA 11 , are asking for more time to implement trade liberalization and for broader exemptions to increase tariffs when their domestic agriculture or manufacturing industries are threatened by floods of cheaper imports. This problem of the lack of necessary "policy space" was noted in a recent report by the Africa Progress Panel, chaired by former UN Secretary General Kofi Annan. The Panel expresses concerns about the European Union's proposed Economic Partnership Agreements (EPAs), which seek to make access for African goods into European Union markets conditional on Africa eliminating or lowering tariffs on 80 percent of imports from the European Union. The report suggests that this would be highly damaging to domestic industries.
Though African countries desperately need the policy space to adopt industrial policies, the rich countries are pushing loan conditions and trade and investment agreements that block them from doing so, all the while proffering a happy narrative about "the rise of Africa." The very idea of industrialization has been dropped from the official development agenda. Yet there's a reason why we all regularly refer to the rich, industrialized countries in the OECD as "industrialized."
Despite the important gains in services industries and per capita incomes, Africa is still not rising, and services alone will not create enough jobs to absorb the millions of unemployed youth in Africa's growing urban areas. Instead, steps must be taken to revise WTO agreements and the many trade agreements and bilateral investment treaties currently being negotiated so that Africa has the freedom to adopt the industrial policies it needs in order to make genuine progress.