Industrial Policy with Conditionalities: A Taxonomy and Sample Cases

Authored by Professor Mariana Mazzucato and Professor Dani Rodrik

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UCL Institute for Innovation and Public Purpose (IIPP) Working Paper Series: IIPP WP 2023-07

Authors:

• Mariana Mazzucato | Professor in the Economics of Innovation and Public Value | University College London, Institute for Innovation and Public Purpose (IIPP)
• Dani Rodrik | Ford Foundation Professor of International Political Economy | Harvard University, John F. Kennedy School of Government

Reference:

Mazzucato, M. and Rodrik, D. (2023). Industrial Policy with Conditionalities: A Taxonomy and Sample Cases. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2023-07). Available at: https://www.ucl.ac.uk/bartlett/public-purpose/wp2023-07

Abstract:

In the context of a shift towards longer-term, public-value-oriented economic thinking, there is a real opportunity to reimagine the contracts that structure public-private relationships. Similar reasoning could also be relevant to the relationship between different public entities, such as the relationship between a country’s state-owned enterprise and the Treasury: benefits to the SOE can be structured with conditions to make sure the SOE directs its investments in particular ways, shares knowledge, makes products/services accessible, etc. Redesigning these contracts means redesigning the direction of the economy from the ground up. To succeed, modern industrial policies must be deliberately sustainable, welfare-oriented, and innovation-led; coordinated as a holistic package; and implemented cooperatively across government agencies and with the private and third sectors. The conditionalities written into contracts are a key site for realizing these aims.