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

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  • Matthew McCartney

    (Director of the Contemporary South Asian Studies Programme and Associate Professor, School of Interdisciplinary Area Studies, University of Oxford.)

Abstract
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. This paper makes a case for a particular and targeted form of industrial policy that would help the textiles sector learn and upgrade. It 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. The key market failure is the risk and uncertainty associated with acquiring and learning to use new technology. The paper 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.

Suggested Citation

  • Matthew McCartney, 2014. "The Political Economy of Industrial Policy: A Comparative Study of the Textiles Industry in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(Special E), pages 105-134, September.
    • Handle: RePEc:lje:journl:v:19:y:2014:i:sp:p:105-134
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    References listed on IDEAS

    as
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    Cited by:

    1. Matthew McCartney, 2015. "The Missing Economic Magic: The Failure of Trade Liberalization and Exchange Rate Devaluation in Pakistan, 1980–2012," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 59-86, September.
    2. Inayat U. Mangla & Muslehud Din, 2015. "The Impact of the Macroeconomic Environment on Pakistan’s Manufacturing Sector," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 241-260, September.
    3. Akbar Noman, 2015. "The Return of Industrial Policy and Revival of Pakistan’s Economy: Possibilities of Learning, Industrial and Technology Policies," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 31-58, September.
    4. Matthew McCartney, 2016. "Costs, Capabilities, Conflict and Cash: The Problem of Technology and Sustainable Economic Growth in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(Special E), pages 65-98, September.

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    More about this item

    Keywords

    Pakistan; Korea; Bangladesh; textiles; industrial policy; technological change; upgrading.;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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