The debate in economics regarding the
effectiveness of industrial policy is at an all-time high. An industrial policy
is usually a set of actions that combine and coordinate government efforts to
bolster economic activities in one or more sectors of the economy. They could
include strategic protection of certain industries, government subsidies,
direct public sector investments, tax holidays and breaks, supply-chain
resilience, job creation, better-paying jobs, greening the economy, etc.
اضافة اعلان
After having been shunned for decades due
to the pervasiveness of neoliberal demagoguery, and the focus of analysis on
import duties, there is currently a growing prevalence of industrial policies.
Furthermore, as in the past, the pursuance of such policies is led by the
countries of the global North. It is
time that Jordan devises and implements an industrial policy.
International examples
The Biden Administration issued legislation
last year that would pump over a trillion dollars into the economy with a focus
on innovation, technology, IT, green economy, and infrastructure. The
legislation, which intends to syphon investment out of other countries, create
new jobs in the US, and maintain its innovative and experiential global
leadership is camouflaged in a legitimate sounding cloak of creating a greener
economy.
But the US is not alone, the European Union
is introducing similarly protective legislation on semiconductors to increase
the EU’s share in global chips production capacitors. China also aims to boost
its high-tech manufacturing. Furthermore, the World Economic Forum believes
that industrial policies will have a significant impact on the global economy
in the coming years.
Economic wars
Although industrial policies may trigger
economic wars reminiscent of the 1930
Smoot-Hawley Tariff Act, a United States law that raised import duties
to protect American businesses and farmers. The result was severe retaliation
by many foreign governments. China is already imposing its protective measures
on semiconductor sales in response to the recent US deglobalizing actions.
There is almost a consensus among
economists that industrial policies will deepen geo-economic rivalries and
tension, and, if they become widespread, reduce competition in some areas as
countries attempt to monopolize certain industries or products, relocate
economic activity and increase sovereign debt.
However, some believe that industrial
policy will also increase innovation. Moreover, the success of so many
countries that adopted industrial policies underscores their effectiveness in
pushing the development of economies that adopt such policies.
Jordan’s case for innovation
Jordan needs to have an industrial policy
with an emphasis on innovation. Why innovation? Because innovation is the
vehicle for enhancing productivity, and productivity increases the incomes of
workers, business owners, and government—and they all need a boost right now.
Furthermore, innovation attracts foreign investment and investors as well as
domestic investment; thus investment promotion is more likely to succeed in
economies where productivity is growing at a fast pace.
Alas, currently Jordan’s scores in the
Global Innovation Index (GII) in 2022, ranked 78 out of 132 countries, is no
cause for celebration. Jordan is weakest in infrastructure, ranked 100, and not
doing so well in human capital and research, at 76th place, in business
sophistication it ranked 75th, knowledge and technology outputs, 76th again,
and creative outputs, 78th. Hence, the industrial policy that should be adopted
must be mission-oriented with innovation enhancement being at its core.
Otherwise, the necessary innovation solutions will not happen, and productivity
will remain stymied.
Resources should be reallocated to funding
innovation whereby the government finances research that is done by the private
sector. The success of the research can
be availed to the private sector for developing and commercializing its results
under special conditions that ensure its spread throughout the economy.
Yusuf Mansur is CEO of the Envision Consulting Group and former minister of state for economic affairs.
Read more Opinion and Analysis
Jordan News
.jpg)
.jpg)
