LSE - Small Logo
LSE - Small Logo

Dipa Patel20

October 17th, 2018

Cutting Edge Issues in Development: Industrial Policy, Trade and Development in the New Global Economic Order

0 comments

Estimated reading time: 5 minutes

Dipa Patel20

October 17th, 2018

Cutting Edge Issues in Development: Industrial Policy, Trade and Development in the New Global Economic Order

0 comments

Estimated reading time: 5 minutes

On Friday 12 October, development economist Ha-Joon Chang came to talk at the LSE as part of the International Development Department’s Cutting Edge Issues in Development Thinking and Practice lecture series. Kyeonga Kang from the MSc African Development was there and covered the talk for us.

Professor Ha Joon Chang, speaking to a packed Sheik Zayed Theatre, for the launch of Cutting Edge Issues in Development Thinking and Practice guest lecture series

“The recent changes in global industrial policy environment have not made industrial policy impossible.” Chang stressed in his lecture that industrial policy is still valid nowadays. So, countries- especially developing ones- should try to use it in a smart way!

Ha-Joon Chang is an institutional economist specializing in development economics. Currently a Reader at Cambridge University, he is well known for his book Kicking Away the Ladder: Development Strategy in Historical Perspective, which won the Gunnar Myrdal Prize in 2003.

What is industrial policy? It is a strategy used by countries to encourage growth and development in specific sectors. Skepticism exists about the feasibility of using it. However, as Chang argues, industrial policy has been used more extensively and intensively by today’s rich countries. The US and Britain had a much higher degree of protectionism (compared to developing countries today).

The Now Developed Countries (NDCs) are in effect “kicking away the ladder” by which they have climbed to the top beyond the reach of the developing countries. (…) This means that today’s developing countries need to impose much higher rates of tariff than those used by the NDCs in earlier times, if they are to provide the same degree of actual protection to their industries as the ones accorded to the NDC industries in the past. Ha-Joon Chang, Kicking Away the Ladder

This doesn’t mean that developing countries were not successful in using industrial policy. Some success has been achieved despite the unfavorable environment. Here remain the implementation issues. How should it be implemented? First, industrial policy should be realistic. However, this does not mean just to avoid risk. Some risk taking is absolutely necessary. Secondly, policy should be adapted to changing conditions.

A lot of people seem to think that there is no longer a place for industrial policy, especially after the establishment of the WTO in 1994. Also, a large number of bilateral and regional treaties are concluded between countries. However, Chang claims that industrial policy can still be used legally. For example, tariffs can be negotiated, subsidies are not banned by the WTO, BITs can be revoked or renegotiated.

So, what can developing countries do? To start with, developing countries should develop their economy through policies that are more “Global value chains (GVCs)” friendly. This is because GVCs bring inflows of FDI, which brings capital and technologies. This requires intelligent industrial policy. If not done properly, this can harm the economy of developing countries as in the case of Latin America in the late 1980s.

Through his lecture, Chang points out three things. First, industrial policy is still valid in today’s global economy. Secondly, industrial policy-makers should not be bound by theory. They should fully exercise their “policy imagination” as in the case of Taiwan. Finally, the importance of productive capability building in economic development cannot be emphasized enough. But, there is no “one size fits all” model as Chang says. Countries, especially developing countries should use smart and good industrial policy to confront the conventional wisdom often imposed by early developed countries.

Don’t miss out: On Friday, 19 October, Kate Raworth from the Environmental Change Institute at Oxford University will be speaking on “Doughnut Economics and Development”. The lecture takes place from 4-6pm in the Sheikh Zayed Theatre in the New Academic Building at the LSE. External guests need to register by sending an email to S.M.Neuenschwander@lse.ac.uk.

See the full schedule for the Michaelmas term lectures here.


Kyeonga Kang is a student of the MSc African Development. Her academic interests include the diplomatic relationship between Korea and African countries.

About the author

Dipa Patel20

Posted In: Events | Featured | Student Experience

Leave a Reply

Your email address will not be published. Required fields are marked *

RSS Justice and Security Research Programme

  • JSRP and the future
    The JSRP drew to a close in 2017 but many of the researchers and partners involved in the programme continue to work on the issues and theories developed during the lifetime of the programme. Tim Allen now directs the Firoz Lalji Centre for Africa (FLCA) at LSE where many of the JSRP research team working […]
  • Life after the LRA
    The JSRP reached the end of its grant in spring 2017 but several outputs from the programme are scheduled for publication in the coming months. The most recent of these is a new journal article from Holly Porter and Letha Victor drawing on their extensive research with JSRP in the Acholi region of northern Uganda.  The […]

RSS LSE’s engagement with South Asia

  • How India’s tilted Foreign Policy paved China’s road to South Asia
    This post by Tarushi Aswani examines India’s relationship with fellow South Asian countries, and how recent foreign policy initiatives may have rendered the largest democracy in the world ‘friendless’ in its South Asian neighbourhood, paving the way further for China to make inroads into South Asia.   While Covid-19 might have rekindled SAARC members’ relationships […]
  • Covid Narratives of Women Entrepreneurs in Bangladesh
    This blogpost is a collective first-person narration of the experiences of a group of women micro-entrepreneurs in Bangladesh, with a particular focus on the challenges posed to them during the Covid-19 pandemic in 2020. To retain the fluid nature of their conversations, the post is published as a free-flowing narrative. Acknowledgements to contributors and participants […]