Beyond Market Failure: A Critique of the ‘New Economics of Industrial Policy’

ABSTRACT In recent years, there has been an apparent tidal shift in neoclassical industrial policy scholarship as a ‘new economics of industrial policy’ has emerged. These scholars claim to have fundamentally repositioned the debate on industrial policy, supposedly offering a novel account of how, and why, states turn to industrial policy (the ‘new economics’), as well as a precise measurement of its causal effects (‘the new empirics’). In particular, the ‘new economists’ claim to show that the South Korean state, undistracted by politics, could follow a strictly economic rationale and could correct the significant market failures that occur in the development process. Following Marxist scholarship on the state, this article suggests that this is fundamentally misleading. The author argues that, rather than correcting market failures, the South Korean state intervened to support capital accumulation through markets. While the new economists are right to suggest that the South Korean state seemingly acted in a rational manner, this was a peculiarly capitalist rationality, and one that rested upon the violent subordination of labour and containment of democratic pressures. The apparent depoliticization, or bureaucratic autonomy, achieved by the South Korean state was key to this effort.