Towards inclusive industrial policy: Taking stock of a debate in flux

Industrial policy is back on the policy agenda in advanced and emerging markets and developing economies alike. Unlike its predecessors in the second half of the 20th century, which either have been praised as a key to success for economic catch-up growth in Southeast Asia or blamed for economic failure elsewhere, today's calls for active industrial policies take the lessons of the past seriously. In this paper, I first take stock of the rationale of such a new industrial policy, then explore the contemporary challenges to such a policy and, in consequence, make the case for an inclusive industrial policy that goes beyond the promoting selected manufacturing industries, but must be driven by and addressing societal goals, namely to promote inclusive economic development and shared wealth on a sustainable base. This approach is illustrated with three key areas of policy intervention, namely Rodrik's 'good-jobs development model', directing technical change, and inclusive finance for small and medium enterprises.