Developing Economies with Industrial Policy: Towards a Toolbox for Economic Growth. With Case Studies of Jordan and Egypt

During the past two decades, the “Washington Consensus” has been the dominant recipe for unleashing economic growth in developing countries. In view of the strong criticism mounted against it, it seems to have lost prominence recently. The success of the East Asian newly industrialized economies and recently of China is often seen as an alternative way towards economic development. However, most instruments stipulated in the Washington Consensus can be reconciled with successful measures employed by industrialized or fastly industrializing Asian economies. Most likely, the stability and market orientation of the Washington Consensus as a recommendation for developing countries is not wrong in itself but rather incomplete. In order to give developing countries a perspective for durable and preferably inclusive growth, it must be complemented by a modern and market-oriented industrial policy aimed at upgrading the economy's competitiveness. Such a “newer” industrial policy offers a host of instruments that can enhance economic growth in a generally favorable macroeconomic framework that can be achieved through the Washington Consensus. This article undertakes to integrate industrial policy in a comprehensive toolbox for economic growth and takes Jordan and Egypt as examples for how industrial policy measures are employed in practice.