With industrial policy back in fashion worldwide, the question is not whether governments should intervene (they already do), but how they should proceed when they do not know in advance what will work. The answer lies in directed improvisation: creating the conditions for experimentation where it counts.
WASHINGTON, DC—Industrial policy is back, and with a vengeance. After decades of preaching neoliberalism, Western policymakers and intellectuals have rediscovered the role of the state in economic development. Even the World Bank has jumped on the bandwagon, conceding that its old advice now has the “practical value of a floppy disk,” and that every country should make industrial policy part of its national toolkit.