Decentralizing industrial policies: threat or opportunity in developing countries?

Over the last decade a new approach to industrial policy has been maturing, after a long period of abandonment of state-centred, top-down, and product-specific industrial policies. The new approach, stimulated by the revival of traditional industrial districts as well as new patterns of regional revival based on high tech industries, is bottom-up, associationalist, and cluster-based. As an approach that does not radically threaten the market foundations of neo-liberal thinking that has become so prevalent around the world, the new decentralised approach to industrial policy has rapidly grown from its modest beginnings into a new policy orthodoxy for dealing with spatial inequality through attempts to boost local economic competitiveness. In this paper we examine the central tenets of the new policy approach, which combines supply-side intervention with regional boosterism as a new form of industrial policy. We then critically review the applicability of the new approach in the context of countries with fragile or absent macro-economic stability, based on a detailed case study of a relatively buoyant industrial district in Argentina. We conclude that decentralised policies in the absence of a stable and interventionist macro-economic policy framework risk becoming, at best, blunt instruments, and, at worst, unwitting agents in a broader policy framework that might actually be increasing economic inequality.

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