André Nassif, Luiz Carlos Bresser-Pereira and Carmem Feijó
Cambridge Journal of Economics, 2017
The majority of economic literature tends to discuss economic development issues by analysing the industrial policy and other long-term development policies separate from short-term macroeconomic policy. However, development strategies require a close coordination of the macroeconomic regime with the industrial policy. In addition to Brazil, our analytical discussion and normative implications can be addressed to other developing countries also facing premature deindustrialisation. We propose an analytical discussion of the phenomena of industrialisation, deindustrialisation and reindustrialisation, including a discussion on the connection between the macroeconomic regime and industrial policy, both oriented to reindustrialisation and catching up. The main point is that both policy regimes must be closely coordinated with each other. Concerning the macroeconomic regime, we argue that consistent monetary, fiscal, wage and exchange rate policies are those which are able to not only keep price stabilisation, but also provide average real interest rates below the average real return rates on capital, a competitive real exchange rate and real wage rates increasing in accordance with labour productivity growth. As for industrial policy, theoretical and empirical evidence suggest strategies aimed at the diversification of production, processes and products, especially within the manufacturing sector and within tradable segments of the service sector.
