The World Bank, which for decades advocated for policies of economic liberalization and greater market prominence, rehabilitated industrial policy in its report “Industrial Policy for Development: Approaches in the 21st Century,” released in March. This shift in position, amidst a scenario of economic slowdown, rising protectionism, and global technological competition, was at the center of the debates at the seminar “Industrial Policy for Development: The World Bank in Transformation,” held this Friday (May 29) at the Institute of Economics (IE) of Unicamp.
The event brought together Marcos Chiliatto, executive director of the World Bank in Brazil and an IE alumnus, and the report’s co-authors, Ana Margarida Fernandes from Portugal and Tristan Reed from the United States.
Chiliatto highlighted that the institution’s change of position represents an important revision of a model that has prevailed since the 1990s, in the context of the so-called Washington Consensus. “At that time, the World Bank had a very reticent position regarding industrial policy. There is a classic document published in 1993, called ‘The East Asian Miracle’. The very idea of ’miracle’ already carried an interpretation that Asian success did not come from public policy, but from very specific conditions, difficult to reproduce,” he explains.
According to him, the prevailing view at that time was that state-led industrialization experiences, such as those seen in East Asia, had a low probability of replication in other countries and a high risk of failure. “The bank recommended that countries not follow this path, arguing that they should focus on macroeconomic stability and let markets drive development,” he added.
Chiliatto points out that this position has always encountered resistance in institutions like Unicamp. “The Institute of Economics has always had a critical tradition. That’s why I insisted on presenting the report at Unicamp, which had professors who helped build a uniquely Latin American perspective on development,” he states.
The report concludes that the previous view “has aged poorly like a floppy disk.” “[The new report is] basically an acknowledgment that the evidence accumulated over the last 30 years shows that several countries—rich and developing—have pursued industrial policy with significant results.”
According to him, the study mapped experiences in more than 180 countries and concluded that industrial policy has a greater possibility of being replicated than was imagined in the 1990s. “The professors at Unicamp will certainly say that this evidence already existed before. But the important thing is that now the World Bank recognizes this institutionally.”
Chiliatto compared the institution’s role to that of a development bank. “The World Bank functions, to a certain extent, like a global BNDES (Brazilian Development Bank). It offers long-term financing for infrastructure, energy, and public policies, but it also brings knowledge and experience accumulated in different countries.” As an example, he cites the institution’s partnership in the creation of the Bolsa Família program. “When President Lula launched the program, the World Bank participated in the design of the policy, the conception, and the construction of the Unified Registry. Later, this Brazilian experience was taken to several African countries,” he says.
According to the director, emerging countries such as Brazil, Mexico, Colombia, and Indonesia have begun to advocate for the World Bank to also act as a partner in industrial policy strategies. “If the bank could collaborate on social policies, why couldn’t it also collaborate on industrial policy? This demand has been growing over time.” For Chiliatto, the new report represents precisely this institutional change. “It’s an important revision. When new evidence shows that a position was wrong, it needs to be revised. In science, that’s how it works.”
“The report receives criticism from both heterodox and orthodox economists. Many say that this change is still timid, and this criticism makes sense. The bank continues to insist on the importance of fundamentals such as education, infrastructure, macroeconomic stability, and fiscal responsibility,” he points out. Even so, Chiliatto considers that the change already represents a significant step. “The fact that the World Bank explicitly recognizes that industrial policies can work and be replicable is already an important institutional transformation.”
Pay attention to the topic
Economist Ana Margarida Fernandes, one of the co-authors, highlights the importance of discussing the report, which took about a year and a half to prepare. “It’s important to show that the World Bank is paying attention. It was a long process, involving a lot of data analysis, studies, and evidence.”
According to her, the objective was to gather and analyze the successes and failures of industrial policies in different countries over the last few decades. “We wrote this report to better inform emerging countries about what might work, what might go well, and what the possibilities are.”
Brazil hosted a series of presentations of the report at the Ministry of Finance in Brasília, at a conference on industrial policy in Rio de Janeiro, and at the Getulio Vargas Foundation (FGV) in São Paulo, prior to the seminar at Unicamp. “There were difficult questions, some criticism as well, but we are pleased that the World Bank is addressing this issue,” he stated.
American economist Tristan Reed, co-author of the report, pointed out that one of the main objectives of the study was to understand, based on recent evidence, which industrial policy instruments actually work. According to him, for a long time the debate was excessively focused on subsidies or tariff protection, when, in practice, industrial policies involve a much broader set of instruments, such as professional training, infrastructure, financing, support for innovation, universities, and research institutions. “Often, the greatest impacts come not only from tax incentives, but from building productive and technological capacities over time,” he states.
The economist also noted that effective industrial policies require institutional coordination and continuity. According to him, countries that have managed to advance technologically have combined state support with clear performance targets, competition between companies, and evaluation mechanisms. “The important thing is not simply to protect sectors, but to create conditions for companies to learn, innovate, and become competitive,” he added.
Reed points out that “structural transformations take time. Building technological capabilities, training a skilled workforce, and consolidating new productive sectors don’t happen quickly.”
According to the economist, the report seeks precisely to offer a set of practical evidence to guide governments in formulating these policies. “The question today is no longer whether or not countries should pursue industrial policy, but how to design more effective policies, adapted to the capabilities and objectives of each economy,” he concluded.
Practical guidance
The report rehabilitates industrial policy by analyzing slower global growth, labor market transformation, the advance of automation, increased protectionism, and technological competition between countries. The text provides practical guidance, based on evidence from over 60 economies, and identifies specific approaches for governments to use industrial policy for different objectives: generating foreign exchange, creating jobs, reducing pollution, or strengthening security and resilience.
The document identifies 15 industrial policy instruments, organized into three groups: targeted public inputs, market incentives, and macroeconomic interventions. These include industrial parks, vocational training programs, export support, business subsidies, local content requirements, government procurement, and innovation incentives.
The data presented show that, among upper-middle-income economies, total subsidies to companies currently represent an average of 4,2% of Gross Domestic Product (GDP), the highest value ever recorded. In other words, industrial policy never disappeared: governments practiced it while the World Bank preached the opposite.
One of the central points of the report is the criticism of the indiscriminate use of protectionist measures. In one of the most emphatic passages, the authors state that many governments still use “sledgehammers” when they should be working with “scalpels,” comparing broad tariffs and generalized subsidies with more precise and targeted instruments. The text also argues that industrial policies should have a defined timeframe and be constantly evaluated. The recommendation is that governments withdraw incentives when companies fail to meet performance, innovation, and competitiveness targets.
In conclusion, the document summarizes the World Bank’s new position in a pragmatic formulation: the question is no longer whether governments should or should not pursue industrial policy, but rather to discover which instruments work in each context and how to avoid wasting public resources.
The report is available. online
Historical accumulation of reflection on the topic
At the opening, the director of the IE, Célio Hiratuka, recalled the Institute’s tradition in studies on the subject. “[I am] happy about the presence of experts,” he highlighted. IE professor André Biancarelli, organizer of the seminar, emphasized that holding the debate at Unicamp carries symbolic weight. “Here there is a historical accumulation of reflection on development, industry, and the role of the State. Unicamp has always had economists who defend industrial policies even when that became almost a dirty word in the 1990s,” he says.
Professors from the Institute of Economics (IE) linked to the Brazilian developmental debate, such as Mariano Laplane and Renato Garcia, also participated in the event. Laplane pointed out that the report represents an important turning point and recognizes something that several researchers in the field of development have been pointing out for decades: markets, on their own, cannot produce the structural transformations necessary to reduce inequalities and expand productive capacities.
“There is now a greater recognition that public policies, state coordination, and institutions play a decisive role in development processes,” he stated. Laplane also drew attention to the challenges faced by developing countries in the face of new technological competition and the reorganization of the global economy. “Building productive capacity requires time, institutional coordination, and continuous investment in science, technology, and education,” he said.
Professor Renato Garcia from the Institute of Economics emphasized that the debate on this topic is part of a historical trajectory. He was a student of economist Wilson Suzigan, a national reference in studies on industrial development, who passed away in April, in the course Industrial Policy and Development, which he now teaches at the Institute of Economics. “It was there that I learned that industrial policy is, above all, a development policy,” he says.
“Professor Suzigan always argued that rich countries criticized industrial policy in their discourse, but continued to use instruments to support technology, science, and production,” he recalls. Garcia notes that the new report acknowledges that industrial policies can boost innovation, productivity, and job creation, provided they are used with clear objectives, technical capacity, and evaluation mechanisms.
Garcia points out that the new report incorporates some of this accumulated debate by acknowledging that there is no single model. “The report recognizes something that has always been debated here: development doesn’t happen without strategy, institutions, and public policy,” he adds.
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