Beyond Neutrality: Notes on Strategic Industrial Policy and Implications for World Bank Engagement

Overview & Synopsis

The recent resurgence of industrial policy in global discourse is driven by the need for resilient supply chains, quality employment, green transitions, and rising geopolitical tensions. While governments have long practiced industrial policy, its prominence in public debate is new, overcoming historical resistance from mainstream economics. In 2023 alone, over 2,500 industrial policy measures were recorded globally, with more than two-thirds having trade-distorting effects. The US, EU, and China accounted for half of these, with advanced economies using such policies more frequently than developing ones. Tools like maintaining a stable and competitive exchange rate are commonly employed. A key motivator is “strategic competitiveness.” The impact of these policies varies, and new research is shifting the debate from whether to use industrial policy to how best to implement it. Middle-income countries are increasingly seeking guidance on designing effective policies and understanding the implications of industrial policy trends in advanced economies. The World Bank is positioned to offer evidence-based advice and operational support, including investment financing and budget support. While skepticism remains, successful examples suggest that a pragmatic approach, supported by clear policy frameworks can help countries navigate and benefit from industrial policy initiatives.