Industrial Policy and the Politics of Economic Upgrading

When is economic upgrading successful and when does it fail?

With so many states committed to economic transformation, and so many experts ready to provide technical advice on how to achieve it, why does progress so often remain elusive? In Pursuit of Prosperity examines the process of economic upgrading—moving to more valuable activities in production, improving technology, knowledge, and skills, and participating in global value chains—and develops a new theory to explain the form and success of national policies designed to promote it.

Using a mixed-methods approach, Charles R. Hankla draws upon archival research and interviews from France and India as well as quantitative models of sixteen countries across six decades. He finds that when state and private actors are aligned in their institutional structures, which can happen in both corporatist and pluralist systems, industrial policy tends to be more effective. It is when the state or the private sector independently dominates industrial policy that poor outcomes are most likely. As In Pursuit of Prosperity shows, rather than being fixed characteristics of countries, policymaking styles vary across time and across sectors of the economy, reflecting the changing power dynamics and organizational resources of stakeholders. The book sheds light on how industrial policy—which is experiencing a comeback in the United States and beyond—can best be harnessed for upgrading. It offers a valuable contribution to our understanding of the complex relationship between state politics and economic performance in the modern globalized world.