What are the advantages and disadvantages of a national Industrial Policy?

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Industrial policy is an initiative by the government to increase productivity in the manufacturing sector and boost the economy. The main advantage of an industrial policy is that it leads to economic development. A good example is Japan during the post-World War II period. After the war, the country’s economy...

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Industrial policy is an initiative by the government to increase productivity in the manufacturing sector and boost the economy. The main advantage of an industrial policy is that it leads to economic development. A good example is Japan during the post-World War II period. After the war, the country’s economy was left in a bad state. To boost employment, the country introduced several industrial policies meant to encourage international trade and the development of Japan’s manufacturing sector. By the 1980s, Japan was one of the top economies in the world.

China is also another country that has used industrial policies to grow its economy. The Chinese government offers incentives to local firms. It also protects Chinese firms by imposing limitations on international companies that want to enter the market.

The main disadvantage of industrial policy is that it acts as a barrier of entry for international firms. In the US, some experts believe that an industrial policy would hinder the country’s economic progress. The US economy is laissez-faire, which means that there is minimal government intervention. Government control would hinder and limit private business profitability. Industrial policies can also create animosity between countries. A good example is the trade war between China and US.

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