The Rising State
Which would you pick?
After countless years of experimentation, consensus on economic policies have not been quite useful in application because of acknowledgement of vast differences between individual economies and the fact that different cultures would have an influence on the reaction of the economy to a government policy.
Industrial policy usually seems pretty attractive as a means of guiding the growth of an economy. Singapore is an attractive example and our success too often is related to some sort of plan, policy or programme by the government that we almost forgot that the economy and people plays a huge part as well. The Economist is not exactly in favour of industrial policy. In the article, it highlights the trouble with industrial policy, and how the success claimed by it relied heavily on privatization and the free market.
Nevertheless, we must acknowledge that government does play a part in helping to brand the giants and create the necessary initial conditions and connections that the industries need to thrive subsequently. The industrial policy, is thus about giving the right industry the right aid or initiating the right investments and then moving out at the right time. In this aspect, Singapore has often done exceptionally well, recognizing when to deregulate a market, and also introducing competition.
The Economist highlighted an important point in its conclusion about industrial policy though:
[...] rather than the failed policy of picking winners, governments should encourage winners to emerge by themselves, for example through the sort of incentive prizes that are growing increasingly popular.
Another article elaborates more on the core arguments about industrial policy. Indeed, the industrial policy should not be able 'picking winners, saving losers'; it should be designing an incentive structure that will lure winners to emerge. That is the power of the market and the government should help out with this rather than interfere with the incentive system.
August 12th, 2010 - 21:13
Heh does this blog post anything besides meta-commentaries of The Economist? :p
August 12th, 2010 - 22:32
Yes, it does. The recent entry by Wei Seng on Government Intervention made little references to content from The Economist and while I frequently am inspired to write on topics that happen to be published on The Economist, I give commentaries on various other developments as well. Do give us feedback on what you wish to be made available on the ERPZ blog and we’ll try to serve more interests. Do write in to us on our contact form if you’re keen to be a writer as well.
August 15th, 2010 - 22:00
Well Kevin & I happen to be avid readers of The Economist and quite keen in some of the topics that The Economist cover. I would certainly cover articles from more publications in future given the opportunity and when an interesting article comes along. The thing is that in camp the only publications I have access to are my subscriber’s copy of The Economist as well as occasional copies of The Straits Times, so pardon if I review from The Economist too often.