This Is How Industrial Policy Can Go Bad
Odd Lots
Political Influence Trumps Economic Logic
The challenge of implementing successful economic policies, particularly in the context of import substitution, is fundamentally political rather than technical or economic. Critics identified the need for competitive pressures on firms receiving subsidies, advocating for export promotion as a solution. Despite global acknowledgment of the importance of promoting exports to enhance competition, many countries clung to outdated subsidy policies. This resistance stemmed from the political power of firms that dominate industrial capitalist economies. These entities, equipped with significant resources and influence, often obstruct policy changes that could threaten their interests, highlighting a critical misalignment between economic theories and the realities of political dynamics.
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