Is it possible that we have more capacity for change than we are currently expressing? This chapter begins by assessing the historical importance of the Covid pandemic, arguing that it helped revise how we look at the economy. If the way the economy works can be recreated to eliminate the risk of a viral infection, then it can presumably be recreated for the sake of other, equally desirable social goals. At first, one might think these changes signal the return of industrial policy, but I argue that world building differs from industrial policy because it operates at the level of the background conditions under which economic life takes place. These background conditions include the fight against climate change, the provision of skills and political stability and the creation of comparative advantage for national industries. In the end, however, the most general background conditions are formed at the global level. They are the framework conditions of global economic integration, and the need to shape the framework conditions for economic activity is not unrelated to the fact that other states are also trying to shape them. Indeed, both the United States and China believe in the idea of a world system articulating the relations of economic power and dependence at the heart of the global economy.

Chapter 6 studies East Asian economic growth and development strategy. It starts with a section on how economic growth and the theory of growth have been constructed. It then discusses the East Asian economic miracle – rapid growth in GDP per capita with relative equity. Most East Asian countries have chosen a hybrid path, often emulating each other and building on recent successes. Most adopted the developmental-state strategy to different degrees and at different points, and they generally view modernization as a way to regain their past glories. This chapter focuses on material wealth production, with a particular emphasis on how East Asian nations adapt and innovate. It also discusses the consequences of East Asian growth in terms of the rise and fall of nations, the “rich nation, strong army”, the contest of political systems, and the environment. Uneven economic growth is a source of a shifting balance of power.

Low- and middle-income countries (LMICs) are confronted with a new world order in which the major economic powers that promoted multilateralism have moved toward nationalism, localization of production, and de-legalization of dispute settlement in favor of balance of power diplomacy. A counterpart to this trend is declining interest in developmental assistance. It remains to be determined how countries that are not part of the new great power dynamic will acclimate to this new world. LMICs have the opportunity to leapfrog in the current technological environment. A key challenge is securing adequate capital investment, including through the private sector. There is a trend among the capital-exporting countries to negotiate bilateral and plurilateral agreements with LMICs that preclude regulatory measures requiring technology transfer as a condition of foreign direct investment. Because individual private investors within LMICs may lack substantial bargaining power, these agreements diminish LMICs’ capacity to secure favorable terms for technology transfer. LMICs confront terms of trade that favor high-income countries and, more broadly, the ascendance of managed trade policy among economically powerful states. These factors portend the perpetuation of the marked disparity in the distribution of global income and wealth. There are no “magic bullet” solutions on the horizon.

“Japanese collectivism” was criticized most fiercely in the field of economy during the U.S.-Japan trade friction. The Japanese economy was alleged to be collectivistic at three levels: At the company level, Japanese workers were alleged to be loyal to their companies and thus willing to work unusally long and hard. At the company group level, Japanese complanies were alleged to form a closed group (called keiretsu) that worked as a barrier against foreign competitors. At the country level, all Japanese companies were alleged to act like a single company (“Japan Inc.”) under the direction of the Japanese government. However, economic statistics and empirical studies disclosed that all these alleged properties of Japanese economy were unreal. For example, surveys almost unanimously revealed that American workers were more loyal to their companies than Japanese workers. Although Japan was allged to protect its domestic market against American products by means of non-tariff barriers, each Japanese paid as much for American products as each American paid for Japanese products. The disputed trade imbalance was actually created by the difference in population between these two nations.

Introduces the economic crisis that the US is currently experiencing and the reasons why industrial policy is the right solution to it.

In this chapter, I explore the imaginaries of prosperity underlying the European Union’s (EU) approach to industrial law and policy. Long considered a taboo in European politics, the EU began to rediscover industrial policy after the 2008 great financial crisis, gradually increasing its ambitions when it came to shaping the relations between the state and the market. Having reviewed an array of EU measures, starting with the 2010 industrial policy and including the more recent burst of legislative proposals (Chips Act, Batteries Act, Critical Minerals Act, and Net Zero Industry Act), this chapter aims to do two things. First, it identifies shifts in the background understanding of political economy, including the role and appropriate objectives of markets, politics, law, and government, that lie behind successive policy interventions. Second, this chapter sketches the contours of the new synthesis of prosperity that emerges from these recent proposals and measures, while at the same time, and in no ambiguous terms, drawing attention to its considerable limitations.

Lists the policy recommendations the authors draw from the analysis of the book, both for their practical value and to further elucidate that analysis.

This chapter first argues that the disagreement between advocates and opponents of industrial policy is actually a disagreement between the two different market theory paradigms. One is the “neoclassical economics paradigm” and the other is the “Mises–Hayek paradigm.” The chapter then analyzes the challenges faced by industrial policy from the perspectives of both cognitive limitation and incentive distortion. The basic conclusion is that industrial policy is destined to fail. Ignorance of entrepreneurship is the fatal weakness of industrial policy advocates. The two primary justifications for industrial policy are “externalities” and the “coordination failure” of the market. With a correct understanding of entrepreneurship, however, these two justifications are untenable. The chapter also argues that the “comparative advantage strategy” of a nation is endogenously created by entrepreneurs, not determined by so-called “endowments.”

State aid law controls public spending by Member States by prohibiting aid which damages the internal market and encouraging spending on projects of interest to the EU economy. The Court of Justice plays a central role in delimiting the scope of application of State aid law. The Commission has extensive powers to investigate State aid and may order recovery of funds that are granted illegally. This remedy harms the beneficiary but does little to deter the Member State granting aid. The Commission has been successful in reducing the grant of State aid and encouraging States to fund certain types of State aid which contribute to the EU’s emerging industrial policy. Moments of economic chaos like the financial crisis in 2008 and the Covid-19 pandemic led to a significant relaxation of State aid discipline but the Commission used these two crises to press for further economic integration in the form of the Banking Union and the Recovery and Resilience Facility respectively.