‘No policy is an island’ – on the interaction between industrial and other policies1

Abstract

In considering industrial policy from the perspective of other economic policies, this article seeks to identify the sources and consequences of conflict between industrial, competition, trade and fiscal policies. It is observed that the goals of industrial policy, even when economically justified, are often in conflict with competition and trade policy goals. Industrial policy also lacks its own independent instruments and fiscal policy instruments are frequently used and often economically optimal for implementing industrial policy. This can create policy conflict even when the goals themselves are independent. For these reasons, the cost of industrial policy is often the sacrifice of some other policy goal. It is argued that this interdependence narrows the scope for economically sensible industrial policy.