World Bank defends industrial policy

The World Bank publicly defended its new industrial-policy agenda on April 27, arguing governments can support strategic industries if they target real market failures and protect competition. (economist.com) (worldbank.org) Industrial policy is government action to push specific business activities, from assembling cars to building software skills, instead of leaving every investment choice entirely to markets. (worldbank.org) The Bank’s 2026 Policy Research Report, *Industrial Policy for Development*, says global growth is slowing, automation is changing labor markets, and protectionism is rising. It says the report examines 15 major policy tools and draws on evidence from 60 countries. (worldbank.org) That defense follows a broader April 8 rollout across World Bank regional reports, including *Revisiting Industrial Policy: Strategic Options for Today* in Latin America, *Industrial Policy in the Digital Age* in East Asia and Pacific, and *Industrial Policy* in Europe and Central Asia. (worldbank.org 1) (worldbank.org 2) (worldbank.org 3) The Bank’s argument is not that every subsidy or tariff works. Its Europe and Central Asia update says industrial policy should be used sparingly, aimed at specific market failures, and should favor new firms or ideas rather than shield incumbents. (worldbank.org) Its East Asia and Pacific update sets out three rules: get the basics right, do no harm, and test targeted interventions hard. The report says education, infrastructure, government effectiveness, and pro-competition reforms usually deliver higher returns than narrow favoritism. (worldbank.org) The Bank says demand from borrowing countries is already there. In a March 2025 survey cited in a World Bank technical briefing, 80% of 32 lead economists said client governments had asked for advice on industrial policy in the previous year. (worldbank.org) Reuters reported on March 17 that the Bank found developing economies use industrial policy more intensively than rich countries, but warned that relying heavily on tariffs and broad subsidies is a blunt approach that often fails. (usnews.com) (marketscreener.com) That is a sharp change from the institution’s older market-first reputation. Critics on the right, including Cato Institute commentator Veronique de Rugy, have described the 2026 report as a reversal of the Bank’s long-standing push for liberalization and fiscal discipline. (cato.org) The Bank’s own case is narrower than a simple return to state planning. Its reports keep repeating that tariffs are rarely the best tool, competition should be preserved, and the state should supply missing inputs more often than it should pick protected national champions. (worldbank.org 1) (worldbank.org 2) So the April 27 essay was less a new policy launch than a public defense of a position the World Bank had already laid out in March and April: industrial policy is back, but only on a short leash. (economist.com) (worldbank.org)