34 Industrialization in Sub-Saharan Africa
More generally, the nature of industrialization keeps shifting such that the desire for African countries to industrialize is akin to chasing a moving target. The argument is that industrialization is not impossible but is more difficult. It is, however, nearly impossible for industrially lagging countries to catch up to the existing developed economies by following the traditional approaches. In essence, to industrialize on the basis of the traditional understanding would be tantamount to chasing a mirage.
Rethinking Industrial Policy for Africa The concept and the practice of industrial policy are continuously evolving, and there is no single widely accepted definition. The discussion of industrial policy in this report refers to government activities in reorienting production, technologies, and trade, aimed at achieving structural transformation. Industrial policies underpin guiding principles on the “best” way for any society to move its human, capital, and financial resources from low- to highproductivity sectors (Stiglitz, Lin, and Monga 2013). In countries that have managed to transform their economies from low income to middle and high income—including European Union countries, Japan, and the United States, and more recently China, Korea, and Taiwan, China—active government interventions that promoted structural transformation, industrialization, and trade, including active pursuit of selected sectors and markets, are key defining features. There is now an almost complete consensus on the need for a modern industrial policy for Africa. Industrial policies can “tilt” the playing field toward sectors or technologies with positive spillovers or externalities and away from those with negative spillovers or externalities (Stiglitz et al. 2013). Still, for every successful case of industrial policy in East Asia, North America, or Western Europe, there are cases in which industrial policy has failed or may have even restricted the prospects for industrialization and growth, reinforcing the notion that there is no one-size-fits-all policy, and risks of capture by vested interests remain.1 The question is how to implement industrial policy in the current setting in Africa. Pursuing an answer to this question requires a rethinking of industrial policies beyond correcting externalities, market imperfections, and distortions. In this framework, this report adopts two broad classifications of industrial policy—soft industrial policies and hard industrial policies—to address the challenge of providing guidance on industrial policy frameworks for African countries. The distinction is based on scope rather than priorities, and both types of policies are equally important.
