Lahore School of Economics

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The Political Economy of Industrial Policy: A Comparative Study of the Textiles Industry in Pakistan

In a fascinating article published in the Lahore Journal of Economics, Dr. Matthew McCartney (of Oxford University) performed a unique historical analysis of the Pakistani textile sector.

In the article entitled ‘The Political Economy of Industrial Policy: A Comparative Study of the Textiles Industry in Pakistan’, Dr. McCartney analyzed why the textiles industry in Pakistan has failed to fulfill its “historical mission,” whether judged in terms of promoting rapid and sustained economic growth, reducing poverty, or providing employment to young women and so promoting wider social transformation. Dr. McCartney makes a case for a particular and targeted form of industrial policy that would help the textiles sector learn and upgrade.

He argues that those factors commonly seen as constraints to industrial policy - the ‘China effect’, the global rules of globalization, global value chains, and the problems of energy and education in Pakistan — do need careful consideration, but they are not insurmountable obstacles to industrial upgrading. He finds that the key market failure is the risk and uncertainty associated with acquiring and learning to use new technology.

Dr. McCartney then explores a number of policy options, reviewing the lessons that cannot be learned from the Republic of Korea and India and one that can from Bangladesh. The latter shows that rapid and sustainable export growth in textiles can be achieved, even in an economy with a weak, corrupt, and unstable form of governance.

The article is available on the website of the Lahore Journal Economics here

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posted by S A J Shirazi @ 5/18/2015 11:15:00 AM,

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