After authoritarian technocracy: the space for industrial policy-making in democratic developing countries

Abstract

Many developing countries have, in recent years, adopted structural transformation strategies and strengthened state economic activism. While prima facie reminiscent of the post-war era’s developmentalist strategies, contemporary industrial policies have resurfaced in a different environment: they are often designed and implemented in (newly) democratic, rather than authoritarian, political regimes. This paper argues that when democratic developing countries seek to (re)deploy industrial policies, governments must navigate the specific demands arising in an institutional setting in which political power is constrained and contestable. Therefore, the focus of the classical industrial policy literature on instrumental-rational, top-down, technocratic ­policy-making, with centralised state–business relations, needs to adapt to this environment. This paper discusses how challenges to secure fiscal space, reach parliamentary consensus, and address diverse societal demands in a formal democratic institutional setting influence industrial policies in developing countries. We exemplify this using Indonesia as a case study.