THE STATE OF INDUSTRY IN THE THIRD WORLD IN THE 1980s: ANALYTICAL AND POLICY ISSUES

This paper examines the state of industry in the Third World during the 1980s in a longer term perspective and comments on a range of analytical and policy issues connected with its future development. Two main questions are addressed: In what ways and to what extent has Third World industrialization been affected by the post-1979 world economic crisis? What factors account for the widely divergent industrial performances in the developing countries in the 1980s? Specifically, why has Asian industry done so much better than industry in either Latin America or Sub-Saharan Africa? It is argued here that the industrial crisis in the Third World has been overwhelmingly caused by international market forces. The superior performance of the Asian countries in the 1980s is not due to their greater openness; it was made possible because they were less subject to interest rate, demand, and capital supply shocks. The paper points to serious flaws in the industrial policy proposals of the IMF and the World Bank—privatization, deregulation, liberalization, and closer integration with the world economy. In place of these the author gives an alternative perspective on industrial policy for the developing countries in the 1990s.