Towards an institutional setup for industrial policy in late industrialization in the 21st century

Abstract Motivation This article contributes to the ongoing debate on the institutional preconditions for inclusive and sustainable development in the global periphery, countries that are in a subordinate position within global capitalism. Purpose The authors argue that deliberations pertaining to the effectiveness, inclusiveness, and sustainability of economic development must take into account the political‐economic contexts of specific peripheral countries. The article goes on to further conceptualize inclusive late industrialization processes and operationalize institutional setups for industrial policy to make it more useful from a policy perspective. Approach and methods Our conceptual framework draws on neo‐Gramscian and materialist state theory, the developmental regime approach, and other contributions on the necessary conditions for effective industrial policy of late industrializers, particularly in sub‐Saharan Africa. Findings We contend that the peripheral states' strategic selectivity often severely limits the emergence of comprehensive industrialization regimes that have extensive elements of embedded autonomy and hegemony. In fact, pro‐developmental social forces are likely to be more successful in promoting selective industrialization projects in peripheral contexts. Notwithstanding the comprehensiveness of industrialization regimes, we propose the operationalization of industrial policy institutions with regard to their degree of inclusiveness, decentralization, managerialism, and state‐led production. We conceptualize the different ways actors may be included or excluded at different scales of industrial policy institutions. In doing so, potential trade‐offs within and between these institutional areas are highlighted, enhancing the policy relevance of the debate. Policy implications From a strategic policy perspective, the exclusive nature of bureaucratic–authoritarian industrialization regimes of the 20th century needs to be avoided in latecomer industrialization processes of the 21st century, which is why the support of pro‐developmental civil society, and thus the construction of hegemony to achieve inclusive development processes, continue to be crucial in peripheral country contexts. The management of the institutional setup and respective trade‐offs will involve learning‐by‐doing, constant monitoring, and continuous adaptation.